2015 Personal Tax Guide
January 26, 2015
Introduction: Tax Planning In Challenging Times
It has now been more than two years since President Obama signed into law the American Taxpayer Relief Act of 2012 ("ATRA"), and we are just beginning to deal with the resulting increases in taxes. The top federal long-term capital gains tax rate is now 20% and the top federal ordinary income tax rate is now 39.6%. ATRA permanently patched the alternative minimum tax ("AMT"). The top estate and gift tax rate is now 40% and a $5 million gift, estate and generation-skipping transfer tax exclusion (subject to annual adjusts for inflation) was established.
ATRA also provided for several tax incentives for businesses. Many of these credits and incentives expired at the end of 2013. It was not until December 19, 2014 that the President signed into law the Tax Increase Prevention Act of 2014 ("TIPA"), which effectively extended the vast majority of these credits and incentives (a couple did not make the cut!) through December 31, 2014. So the good news is that TIPA provided much needed certainty for 2014 taxes. The bad news is that taxpayers had only a few days left in the year to effectively take advantage of these credits for 2014. Also, because these "extenders" expired again at the end of 2014, we will have uncertainty for 2015 and beyond, as their fate for the future is dependent upon political and economic factors.
Clearly ATRA has had a major impact on the tax situation of many individuals and families. In addition, the Patient Protection and Affordable Care Act imposed a 0.9% Health Insurance Tax on earned income for higher income individuals and a 3.8% Medicare Contribution Tax on net investment income. The tax is imposed on the lesser of (a) net investment income, such as interest income, dividends, capital gains and passive income less expenses directly attributable to the production of such income, and (b) the excess of modified adjusted gross income over a specified dollar amount ($250,000 for joint filers or a surviving spouse, $125,000 for married filing separately and $200,000 for other taxpayers). These taxes are imposed in addition to the other anticipated tax increases and do not impact the regular or AMT calculations.
And of course, health care reform continues to be on the forefront of the news and on the minds of many Americans. Certain mandates of the law went into effect on January 1, 2014, while some others, such as the large employer mandate, were implemented as of January 1, 2015. Business owners need to determine whether their current health insurance benefits meet the minimum essential coverage standard and, if not, whether they should incur the cost of obtaining adequate coverage or just pay the penalties. Do they "pay or play?" Indeed, employers should not only look at their health insurance coverage but the entire compensation package they are offering their employees to maintain cost effectiveness while remaining competitive in the marketplace.
While we now have some degree of certainty with respect to the tax laws, we continue to face much uncertainty with respect to the running of our government. As a result of the November 2014 elections, the Republicans now control both houses of Congress, with a Democratic President in office. This had set the stage for a rather acrimonious encounter in Congress in December, in connection with passing legislation to fund the government and avoid another government shut-down, which we actually witnessed in 2013. In December 2014, Congress did pass a $1.1 trillion spending bill for fiscal year 2015, which the President has signed into law. The legislation provided appropriations through September 30, 2015 for all agencies with the exception of the Department of Homeland Security, for which appropriations were provided only through February 27, 2015. Congress will need to act again to secure the funding for the Department of Homeland Security for the balance of the fiscal year. This action could very well lead to a showdown over President Obama's controversial immigration plan, when a Republican-controlled Congress may take another shot at rolling back the President's executive order shielding millions from deportation.
With the 2013 Supreme Court decision holding Section 3 of DOMA as unconstitutional, same-sex couples who marry under state law are to be treated as married for federal tax purposes. This decision provides many planning opportunities that were not available previously.
The international arena continues to also impact individuals and their families. The concerns over ISIS, North Korea and the Ebola outbreak in West Africa remind us that global threats very much impact families here at home. Many families with wealth are concerned about their children's future as well as their grandchildren's future, and wonder what can be done to sustain and grow their families in these challenging times.
With all of these law changes and current economic and geopolitical conditions, it is extremely important that you pay attention to your financial position so that you can achieve your financial goals, such as retirement planning, managing cash flow, financing the cost of your children's college education and transferring your family's wealth to the next generation.
We have written this guide to provide you with a tool to identify opportunities to save taxes, accomplish your financial goals, and preserve your family's wealth. This guide includes all major tax law changes through January 1, 2015. We have also devoted a chapter to tax planning strategies specifically for same-sex couples. The best way to use this guide is to identify areas that may be geared to your unique situation and then discuss the matter with your tax advisor. As always, our tax professionals will be pleased to discuss any of the ideas in this guide or any other tax planning approaches that might apply to your personal financial situation.
It is never too early to start planning for the new year!
|2015 Personal Tax Guide complete download [Adobe PDF file]|
|chapter||Table of Contents– download by chapter|
|1||Tax Planning Strategies|
|2||Tax Rate Overview|
|3||Estimated Tax Requirements|
|4||Alternative Minimum Tax|
|5||Business Owner Issues and Depreciation Deductions|
|6||Capital Gains and Dividend Income|
|7||Stock Options, Restricted Stock and Deferred Compensation|
|8||Small Business Stock|
|9||Passive and Real Estate Activities|
|10||Principal Residence Sale and Rental|
|14||Estate and Gift Tax Planning|
|17||Planning for Same-Sex Couples|
|18||International Tax Planning and Reporting Requirements|
|19||State Tax Issues|
|Appendix A||2015 Federal Tax Calendar|
|Appendix B||2014 Federal Tax Rate Schedules|
|Appendix C||2015 Federal Tax Rate Schedules|
|Appendix D||2014 and 2015 Maximum Effective Rates|
Angela Chen, Denise DeLisser, Carolyn Dolci, Dan Gibson, Stephanie Hines, Peter Michaelson, Joel Steinberg, Kenneth Weissenberg, Tom Hall
June Albert, Peter Alwardt, Gary Bingel, Lina Chan, Cindy Feder, Susan Fludgate, William Gentilesco, Nancy Gianco, Kety Hernandez, Mary Ho, Cindy Huang, Jean Jiang, Bo Kearney, Lisa Knee, Cindy Lai, Bevin Meade, Jason Michaels, Barbara Taibi, Michael Torhan, Vincent Treglia, Stephen Valentine, Thomas Varga, Evan Waxman, Cristina Wolff, Holly Wong
This tax guide highlights tax planning ideas that may help you minimize your tax liability. This guide does not constitute accounting, tax, or legal advice, nor is it intended to convey a thorough treatment of the subject matter. The best way to use this guide is to identify those issues which could impact you, your family, or your business and then discuss them with your tax advisor.
The discussion in this guide is based on the Internal Revenue Code as amended through January 1, 2015. Future legislation, administrative interpretations, and judicial decisions may change the advisability of any course of action. Because of periodic legislation changes, you should always check with your tax advisor before implementing any tax planning ideas.
Any tax advice contained in this publication (including any attachments) is not intended for and cannot be used for the purpose of (i) avoiding penalties imposed by the Internal Revenue Code or (ii) promoting, marketing, or recommending any transaction or matter addressed herein.
Copyright 2015 by EisnerAmper LLP. All rights reserved. This book, or portions thereof, may not be reproduced in any form without permission of EisnerAmper LLP.