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:
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The Income Tax Rates for 2015
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2015 Single Return Rate Schedule
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2015 Married Filing Jointly Rate Schedule
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Taxable income levels
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Tax rate
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Taxable income levels
|
Tax rate
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| 0 to $9,225 |
10%
|
|
0 to $18,450 |
10%
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| $9,226 to $37,450 |
15%
|
|
$18,451 to $74,900 |
15%
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| $37,451 to $90,750 |
25%
|
|
$74,901 to $151,200 |
25%
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| $90,751 to $189,300 |
28%
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|
$151,201 to $230,450 |
28%
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| $189,301 to $411,500 |
33%
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|
$230,451 to $411,500 |
33%
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| $411,501 to $413,200 |
35%
|
|
$411,501 to $464,850 |
35%
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| Over $413,200 |
39.6% |
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Over $464,850 |
39.6% |
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The Income Tax Rates for 2016
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2016 Single Return Rate Schedule
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2016 Married Filing Jointly Rate Schedule
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Taxable income levels
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Tax rate
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Taxable income levels
|
Tax rate
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| 0 to $9,275 |
10%
|
|
0 to $18,550 |
10%
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| $9,276 to $37,650 |
15%
|
|
$18,551 to $75,300 |
15%
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| $37,651 to $91,150 |
25%
|
|
$75,301 to $151,900 |
25%
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| $91,151 to $190,150 |
28%
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|
$151,901 to $231,450 |
28%
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| $190,151 to $413,350 |
33%
|
|
$231,451 to $413,350 |
33%
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| $413,351 to $415,050 |
35%
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$413,351 to $466,950 |
35%
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| 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 |
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Single return filers - $6,300 |
| 2015 Personal Exemption Amount |
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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
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Year
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Estate Size Where Taxation Starts
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Top estate tax rate
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2015
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$5,430,000
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40%
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2016
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$5,450,000
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40%
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2017
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Indexed for inflation
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40%
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Regular IRA and Roth IRA Contribution Limits
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For tax year
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IRA contribution limit
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Additional contribution limits for those age 50 and over
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2015
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$5,500
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$1,000
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2016
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$5,500
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$1,000
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401(k) Retirement Plan Contribution Limits
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For tax year
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401(k) deferral limit
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Additional contribution limits for those age 50 and over
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| 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
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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.