Useful Income Tax and Retirement Planning Information

There have been several major tax law changes over the past few years with staggered effective dates.  These laws have significantly changed the way you may want to consider your financial situation, especially retirement planning.  Here is some information that you find helpful:

The Income Tax Rates for 2015

2015 Single Return Rate Schedule

2015 Married Filing Jointly Rate Schedule

Taxable income levels

Tax rate

Taxable income levels

Tax rate

0 to $9,225

10%

0 to $18,450

10%

$9,226 to $37,450

15%

$18,451 to $74,900

15%

$37,451 to $90,750

25%

$74,901 to $151,200

25%

$90,751 to $189,300

28%

$151,201 to $230,450

28%

$189,301 to $411,500

33%

$230,451 to $411,500

33%

$411,501 to $413,200

35%

$411,501 to $464,850

35%

Over $413,200 39.6% Over $464,850 39.6%

The Income Tax Rates for 2016

2016 Single Return Rate Schedule

2016 Married Filing Jointly Rate Schedule

Taxable income levels

Tax rate

Taxable income levels

Tax rate

0 to $9,275

10%

0 to $18,550

10%

$9,276 to $37,650

15%

$18,551 to $75,300

15%

$37,651 to $91,150

25%

$75,301 to $151,900

25%

$91,151 to $190,150

28%

$151,901 to $231,450

28%

$190,151 to $413,350

33%

$231,451 to $413,350

33%

$413,351 to $415,050

35%

$413,351 to $466,950

35%

Over $415,050 39.6% Over $466,950 39.6%

2015 Standard Deduction 2016 Standard Deduction
Married couples filing a joint return - $12,600 Married couples filing a joint return - $12,600
Single return filers - $6,300 Single return filers - $6,300

2015 Personal Exemption Amount 2015 Personal Exemption Amount
$4,000 $4,050

2015 and 2016 Taxation of Dividends and Long Term Capital Gains
For taxpayers in the 10% and 15% brackets, qualifying dividends and long term capital gains (assets held for more than a year) will be taxed at 0%. For those in 25%, 28%, 33% and 35% tax brackets, the tax rate on dividends and long term capital gains is 15%. For those in the top 39.6% bracket, the tax rate is 20%.

2015 and 2016 Medicare Surtaxes
As part of the health care reform enacted in 2010, additional Medicare surtaxes began in 2013 for high income wage earners and high income investors. The surtaxes apply when a single taxpayer's Modified Adjusted Gross Income (MAGI) exceeds a threshold of $200,000 or joint return filers when their MAGI exceed $250,000.

  • For wage earners, an additional 0.9% Medicare surtax applies to wages (including bonuses and self-employment income) above the threshold amounts.
  • For investors, an additional 3.8% Medicare surtax applies to net investment income (taxable interest, dividends, capital gains, etc.) in excess of the thresholds.

Estate Taxes

Year

Estate Size Where Taxation Starts

Top estate tax rate

2015
$5,430,000
 40%
2016
$5,450,000
 40%

2017

Indexed for inflation

40%

Regular IRA and Roth IRA Contribution Limits

For tax year

IRA contribution limit

Additional contribution limits for those age 50 and over

2015

$5,500

$1,000

2016

$5,500

$1,000

401(k) Retirement Plan Contribution Limits

For tax year

401(k) deferral limit

Additional contribution limits for those age 50 and over

2015 $18,000 $6,000
2016 $18,000 $6,000

Coverdell Education Savings Accounts (Education IRAs)
For 2015 and 2016, the annual contribution limit is $2000 with eligibility phase out beginning at $190,000 (for married filing jointly) and $95,000 of Adjusted Gross Income (some modifications apply).

Annual Gift Tax Exclusion
For 2015 and 2016, gifts of $14,000 and under are not subject to gift tax.

2015 and 2016 Payroll Taxes - Social Security and Medicare

  • Employee wages subject to Social Security tax of 6.2% - $118,500.
  • Employee wages subject to Medicare tax of 1.45% on all wages and an additional 0.9% on wages above $200,000 for taxpayers filing single returns. For taxpayers filing joint returns, the additional 0.9% applies to wages above $250,000.
  • Self employment income subject to Social Security tax of 12.4% - $118,500.
  • Self employment income subject to Medicare tax of 2.9% on all self employment income and an additional 0.9% on wages above $200,000 for taxpayers filing single returns. For taxpayers filing joint returns, the additional 0.9% applies to wages above $250,000.
  • Notes - The 0.9% additional Medicare tax was part of the health care reform bill and only applies to the employee portion. Employers do not match the additional Medicare tax.

2015 Social Security Benefits
Average monthly benefit for all retired workers - $1,328.
Average monthly benefit for retired couples - $2,176.
Maximum monthly benefit for a worker at full retirement age - $2,663.

2016 Social Security Benefits
Average monthly benefit for all retired workers - $1,341.
Average monthly benefit for retired couples - $2,212.
Maximum monthly benefit for a worker at full retirement age - $2,639


This information has been provided by Financial Wisdom Marketing Services, Inc. and is for educational purposes only.  Content from Financial Wisdom and/or Redwood Credit Union is not, in any way, intended to provide legal, tax, or financial advice.