2015 Federal Tax Adjustment for Inflation

On October 23rd, the Internal Revenue Service (IRS) announced inflation adjustments related to contribution limits to retirement plans for the tax year 2015. With the revised adjustments, in 2015 there will be more scope for retirement savings for the self-employed as well as those with low wages and salaries.

401(k):

For employees participating in 401(k), 403(b), a majority of 457 plans, and the federal government's Thrift Savings Plan:

• Annual contribution limit is up to $18,000 from $17,500 last year.
• For those aged 50 and above, the catch-up contribution limit has been increased to $6,000 from $5,500. With this change, those who are 50 and above can now contribute $24,000 towards retirement savings as opposed to $23,000 in 2014.

Traditional IRAs:

For singles and heads of households who contribute to a traditional individual retirement account (IRA), in 2015, the deduction is phased out for those with modified adjusted gross incomes (MAGI) of between $61,000 and $71,000. This is an increase from the 2014 range of between $60,000 and $70,000.

For married couples who file their returns jointly, and in which the spouse who is contributing to the traditional IRA is covered by a workplace retirement plan, the phase-out range is now between $98,000 and $118,000. This is an increase from the range of $96,000 and $118,000 in 2014.

For married couples who file their returns jointly, and in which the spouse who is contributing to IRA is not covered by a workforce retirement plan, the phase out range for the couple is between $183,000 and $193,000. This range was between $181,000 and $191,000 in 2014.

SEP IRAs and Solo 401(k)s:

In 2015, small business owners and those with self-employment income can now invest up to $53,000 in SEP IRAs (Simplified Employee Pension IRA) and solo 401(k). This is up from £52,000 in 2014.

SIMPLE IRAs:

For SIMPLE IRAs (Savings Incentive Match Plan for Employees IRAs), the contribution limit in 2015 has been increased to $12,500 in 2015, up from $12,000 in 2014. Also, the catch up limit for SIMPLE has been increased to $3,000 in 2015, up from $2,500 in the previous year.

Roth IRAs:

For married taxpayers who file their returns jointly and who contribute to a Roth IRA, the phase out range for 2015 is between $183,000 and $193,000, an increase from the 2014 range of $181,000 and $191,000. And for singles and heads of household contributing to a Roth IRA, the 2015 phase out range is from $116,000 to $131,000, up from $114,000 and $129,000 in 2014. Roth IRAs are named after US Congressman William Victor Roth.

Defined Benefit Plans:

There is no change in the limitation on the annual benefit of a defined benefit plan. The limitations stand at $210,000 in 2015, similar to last year. These plans are designed for self-employed people with high incomes.

Defined Contribution Plans:

In 2015, the limitation for defined contribution plans is $53,000, up from $52,000 in 2014.

Employee Stock Ownership Plans (ESOPS):

For ESOPs, the highest account balance subject to a five-year distribution period is $1.07 million in 2015, up from $1.05 million in 2014.

Compensation Limits:

For 2015, the compensation limit associated with the maximum compensation for an eligible employee in a qualifying plan is $265,000, up from $260,000 in 2014. And for defining a highly-compensated employee, the limitation is $120,000 in 2015, up from $115,000 in 2014.

The Saver's Credit:

Saver's credit is for workers with low-and-moderate incomes. If you contribute a certain amount to the retirement fund, the US government contributes a certain additional amount to your fund. These contributions are only for people with incomes up to a certain limit. Saver's credit is also called as the retirement savings contribution credit.

In 2015, the AGI (adjusted gross income) limit for saver's credit has been increased. For married couples who file jointly, the limit has been increased to $61,000, from $60,000 in 2014. For heads of households, the 2015 limit is $45,750, up from $45,000. And, for singles and married individuals who file their returns separately, the limit in 2015 is $30,500, an increase from $30,000.

You can find full details of the pension plan limitations for 2015 on the IRS website. You can calculate your tax return and tax rebate using the Federal tax calculator.

Social Security Wage Base:

The maximum earnings subject to social security is $118,500 in 2015, an increase from $117,000 in 2014. As per the Social Security Administration, in 2015 there will be a 1.7 percent increase in the monthly Social Security and Supplemental Security Income Benefits.

You can find full details of the pension plan limitations for 2015 on the IRS website.

You can calculate your tax refund for 2015 and tax return using the tax calculator.