Tax Season Is Here: Know the Rules

Taxes will always be with us, so it is important to know IRS tax regulations and use them for your best benefit.  Remember to keep good records to validate your deductions.  I am certainly not smart enough to know all this stuff myself, but I am wise enough to draw out this impactful tax information to use personally and to share with you.
DISCLAIMER:  These 2016 tax rules are summarized from a reputable group of Tax CPA’s.  This information can change and may be applied differently, than stated here, due to your own personal situation.   Check with your own qualified tax preparer for individual application. 
Simple IRA Plan Contributions
Contribution limits for SIMPLE IRA plans increased to $12,500 for persons under age 50 and $15,500 for persons age 50, or older in 2015. The maximum compensation that can be used to determine contributions has increased to $265,000.
Standard Mileage Rates 
The standard mileage rates in 2015 are as follows: 57.5 cents per business mile driven, 23 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations.
Health Care Tax Credit for Small Businesses 
Small business employers who pay at least half the premiums for single health insurance coverage for their employees may be eligible for the Small Business Health Care Tax Credit as long as they employ fewer than the equivalent of 25 full-time workers and average annual wages do not exceed $51,600 (adjusted for inflation).
In 2015 (as in 2014), the tax credit is worth up to 50 percent of your contribution toward employees’ premium costs (up to 35 percent for tax-exempt employers). For tax years 2010 through 2013, the maximum credit was 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities.
Personal Exemptions 
The personal and dependent exemption for tax year 2015 is $4,000.
Standard Deductions 
The standard deduction for married couples filing a joint return in 2015 is $12,600. For singles and married individuals filing separately, it is $6,300, and for heads of household the deduction is $9,250.
The additional standard deduction for blind people and senior citizens in 2015 is $1,250 for married individuals and $1,550 for singles and heads of household.
Income Tax Rates 
In 2015 the top tax rate of 39.6 percent affects individuals whose income exceeds $413,201 ($464,851 for married taxpayers filing a joint return). Marginal tax rates for 2015 — 10, 15, 25, 28, 33 and 35 percent — remain the same as in prior years.
Due to inflation, tax-bracket thresholds increased for every filing status. For example, the taxable-income threshold separating the 15 percent bracket from the 25 percent bracket is $74,900 for a married couple filing a joint return.
Estate and Gift Taxes 
In 2015 there is an exemption of $5.43 million per individual for estate, gift and generation-skipping taxes, with a top tax rate of 40 percent. The annual exclusion for gifts is $14,000.
Alternative Minimum Tax (AMT) 
AMT exemption amounts were made permanent and indexed for inflation retroactive to 2012. In addition, non-refundable personal credits can now be used against the AMT.
For 2015, exemption amounts are $53,600 for single and head of household filers, $83,400 for married people filing jointly and for qualifying widows or widowers, and $41,700 for married people filing separately.
Marriage Penalty Relief 
The basic standard deduction for a married couple filing jointly in 2015 is $12,600.
Pease and PEP (Personal Exemption Phaseout) 
Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) limitations were made permanent (indexed for inflation) and affect taxpayers with income at, or above $258,250 (single filers) and $309,900 for married filing jointly in tax year 2015.
Flexible Spending Accounts (FSA) 
Flexible Spending Accounts are limited to $2,550 per year in 2015 and apply only to salary reduction contributions under a health FSA. The term “taxable year” as it applies to FSAs refers to the plan year of the cafeteria plan, which is typically the period during which salary reduction elections are made.
Specifically, in the case of a plan providing a grace period (which may be up to two months and 15 days), unused salary reduction contributions to the health FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year.
Further, employers may allow people to carry over into the next calendar year up to $500 in their accounts, but aren’t required to do so.
Long-term Capital Gains 
In 2015 taxpayers in the lower tax brackets (10 and 15 percent) pay zero percent on long-term capital gains. For taxpayers in the middle four tax brackets the rate is 15 percent and for taxpayers whose income is at or above $413,201 ($464,851 married filing jointly), the rate for both capital gains and dividends is capped at 20 percent.
Adoption Credit 
In 2015 a nonrefundable (i.e. only those with a lax liability will benefit) credit of up to $13,400 is available for qualified adoption expenses for each eligible child.
Child and Dependent Care Credit 
The child and dependent care tax credit was permanently extended for taxable years starting in 2013. If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses.
For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.
Child Tax Credit 
For tax year 2015, the child tax credit is $1,000. A portion of the credit may be refundable, which means that you can claim the amount you are owed, even if you have no tax liability for the year. The credit is phased out for those with higher incomes.
Earned Income Tax Credit (EITC) 
For tax year 2015, the maximum earned income tax credit (EITC) for low and moderate income workers and working families increased to $6,242 (up from $6,143 in 2014). The maximum income limit for the EITC increased to $53,267 (up from $52, 427 in 2014) for married filing jointly. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.
Coverdell Education Savings Account 
You can contribute up to $2,000 a year to Coverdell savings accounts in 2015. These accounts can be used to offset the cost of elementary and secondary education, as well as post-secondary education.
American Opportunity Tax Credit 
For 2015, the maximum American Opportunity Tax Credit that can be used to offset certain higher education expenses is $2,500 per student, although it is phased out beginning at $160,000 adjusted gross income for joint filers and $80,000 for other filers.
Employer-Provided Educational Assistance 
In 2015, as an employee, you can exclude up to $5,250 of qualifying post-secondary and graduate education expenses that are reimbursed by your employer.
Lifetime Learning Credit 
A credit of up to $2,000 is available for an unlimited number of years for certain costs of post-secondary or graduate courses or courses to acquire or improve your job skills. For 2015, the modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $108,000 for joint filers and $54,000 for singles and heads of household.
Student Loan Interest 
In 2015 you can deduct up to $2,500 in student-loan interest as long as your modified adjusted gross income is less than $65,000 (single) or $130,000 (married filing jointly). The deduction is phased out at higher income levels. In addition, the deduction is claimed as an adjustment to income so you do not need to itemize your deductions.