Hours to go before New Year changes come our way
By Dian Vujovich
Let’s forget about the markets for a moment as there are literally hours to go before 2015 rolls around. And with it come changes likely to impact tens of millions of us regarding the IRS and Social Security.
Here, in no particular order, are a few of them.
•Time is running out for older charitable donors. Very last-minute charitable givers—age 70 or over— have until tomorrow, Wednesday, December 31, to make a direct transfer of part or all of their IRA distributions thanks to the extensions included in the Tax Increase Prevention Act put in place on Dec. 19. Qualified charitable distributions (QCDs) must be transferred directly by the IRA trustee to eligible charities. Up to $100,000 tax-free maybe transferred. Contact your investment advisor to learn more but don’t wait. Deadline for doing this big-hearted act is hours away.
Some good IRS news: The standard deduction, i.e. tax break, that we all get each year has been upped in 2015 to $100 for single filers and $200 for those filing jointly. That translates to $6,300 for single filers and $12,600 for married taxpayers filing jointly.
Also, the interest rates we pay to Uncle Sam for overpayments, underpayments, etc., will remain the same as they are now through the first quarter of 2015.That would be three percent for overpayments and underpayments; two percent for a corporation; five percent for large corporate underpayments; and one-half percent for the portion of a corporate overpayment exceeding $10,000, according to the IRS.
You’ll be able to deduct a penny-and-a-half more per mile for business miles driven thanks to an increase in the standard mileage rate deduction. Beginning in January 2015 it will move to 57.5 cents per mile from 56 cents.
A bit of not-so-good news on this front is if miles driven are medical or moving related, sorry, in 2015 the mileage deduction rates here will be 1 cent less and sit at 23 pennies per mile.
Back to the positive, there’s a continued tax break for Florida residents as well as those living in the six other states that don’t have an income tax: All will continue to be allowed to deduct state and local sales taxes on their federal tax returns.
This deduction has been around since 2004, had expired but earlier this month was extended through 2014. “The extension of the law is really an avoidance of a tax increase when you compare this year to last,” says Tim Steffen, director of financial planning at Baird’s Private Wealth Management group.
•More money and still more money regarding Social Security. On the more money side, over 64 million Americans will see the checks the government sends increase by 1.7 percent. While this cost-of-living adjustment (COLA) may not seem like much, it’s a heck of a lot more than saving accounts, money market accounts or short-term bonds are currently returning. And of that 64 million, 8 million receive monthly Supplemental Security Income (SSI) benefits. The other 58 receive Social Security checks that will go up, on average, around 20 bucks a month.
FYI, the maximum monthly Social Security check someone retiring at full retirement age in 2015 can get is $2,663. That’s up from $2,642.
On the still more money side, paying into Social Security is a lifetime event for as long as you continue to work. In 2015, the cap on the amount of income earned before you can stop paying into that trust fund has been increased to $118,500. That makes it $1,500 more next year.
And on that note, my hope for you is that the New Year brings with it more ups than downs which, when you really actually think about it, it always has.
To read more articles, please visit the column archive.