2015 Social Security Benefits Announced

2015 Social Security Benefits Announced Category: Retirement

The Social Security Administration recently announced monthly social security and supplemental security income benefits (SSI) will increase in 2015 by 1.7%. This increase is based upon the Consumer Price Index over the past 12 months ending in September 2014. In addition, other figures based on the national average wage index will also be changed. A recap of the key amounts is outlined here: 2015 Key Social Security Benefits What does it mean for you? Up to $118,500 in wages will be subject to Social Security Taxes (up $1,500 or $93 in additional Social Security tax per employee and per employer) The average Social Security retirement beneficiary will receive an additional $264 in 2015. For all retired workers receiving Social Security retirement benefits the average monthly benefit of $1,306/mo. in 2014 will become $1,328/mo. in 2015. SSI (Supplemental Security Income) is the standard payment for people in need. To qualify for this payment you must have little income and few resources ($2,000 if single/$3,000 if married). A full-time student who is blind or disabled can still receive Supplemental Security Income (SSI) benefits as long as earned income does not exceed the student exclusion amounts listed above. Social Security & Medicare Rates After temporary payroll tax rate cuts that ended in 2012, the rates do not change from 2014 to 2015. Note: The above tax rates are a combination of 6.20% Social Security and 1.45% for Medicare. There is also a Medicare .9% wages surtax that began in 2013 for those with wages above $200,000 single ($250,000 joint filers) that is not reflected in these figures. Please recall that your employer also pays Social Security and Medicare taxes on your behalf. These figures are reflected in the self-employed tax rates, as self-employed individuals pay both halves of the tax.

Are you prepared for this new IRS Form?

W-2s, 1099s...and Now 1095-A

There will be a new tax form filling mailboxes beginning January, 2015. This Form 1095-A is a Health Insurance Marketplace Statement. If you participate in the Healthcare Marketplace, you will need this new form prior to filing your tax return. Here is what you need to know. Background Each year the tax-filing season begins with the receipt of forms required to file your tax return. Employees receive W-2s from their employers. Individuals receive various 1099 forms for reporting interest, dividends, capital gains and independent earnings as sole proprietors. If you used the Healthcare Marketplace to purchase health insurance, you will now need your 1095-A form to file your tax return. What 1095-A provides Form 1095-A will provide you with a monthly recap of the health insurance you purchased through the Healthcare Marketplace. It will recap the name of the enrollee and any other people covered within the health insurance. The form will also summarize your health insurance policy including the type of coverage and the dates of coverage. What you need to know The information on this form is being sent to the IRS. If there are errors in this form you should take steps immediately to correct them. You need this form to file your taxes. If you use the Healthcare Marketplace do not file your tax return without receiving an accurate 1095-A. You may receive multiple 1095-A forms. You should receive one Form 1095-A for each policy you have through the Healthcare Marketplace. Receiving multiple forms may also occur if you have non-dependents receiving coverage under your health insurance plan. Premium Tax Credit in your future? The information on the form will help determine if you are eligible for the Premium Tax Credit when you file your tax return. Advance Payments of the credit may create a tax obligation. Form 1095-A will show you any advance payments of your Premium Tax Credit made to your insurance company. Excess Advance Premium payments may have to be returned when you file your tax return. Review the months of coverage. If you do not have health insurance coverage for the entire year, this report may also be used to determine if you owe shared responsibility taxes for part of the year.

College Tax Savings: 2014 Edition

Every little break helps Category: Planning

With the start of school just around the corner, it is hard to ignore the high cost of funding a college education. Thankfully, there is some help within the tax code. Outlined here are three of the more popular ways to reduce your taxes in 2014 as a result of this educational expense burden. Who Qualifies: Typically you, your spouse, or a dependent who can be claimed as an exemption on your individual tax return Qualified Expenses: Tuition and fees, course-related books, supplies and equipment Common Tax Benefits: American Opportunity Credit. Amount of Credit: $2,500 per eligible student at an eligible institution ( 100% of initial $2,000 and 25% of the next $2,000 of eligible expenses) Frequency: Available for the first four years of post-secondary education Comments: In 2014, 40% of this credit is a “refundable” credit. This means you can receive up to $1,000 even if you owe no federal income taxes. Lifetime Learning Credit. Amount of Credit: Up to $2,000 per taxpayer for eligible student expenses at an eligible institution (20% of $10,000 in eligible expenses) Frequency: No limit on number of years you can claim the credit Comments: The income limits for this credit are much lower than for the American Opportunity Credit. Student loan Interest Deduction. Amount of Deduction: Reduce up to $2,500 of your income subject to tax Frequency: Per taxpayer per year. Comments: Loan interest not secured by a residence is typically not deductible, so this tax provision is an exception. This reduction in income is available even if you do not itemize your deductions. The One that Got Away? Tuition and Fees Deduction There is also a Tuition and Fee deduction for up to $4,000 in eligible expenses that was available to taxpayers through 2013. Unfortunately, this educational benefit has not been extended into 2014. So if you have used this deduction in the past, it is time to review your other alternatives. But be prepared in case Congress extends this tax benefit once again. Tips to Maximize your Tax Benefit The American Opportunity Credit is per student, while the Lifetime Learning Credit is per taxpayer. So if you have multiple, eligible students, the American Opportunity may be a better choice. Do not use expenses for room and board, health fees, or transportation for these credits. While book expenses required for enrollment can be deductible, other book expenses are excluded from the credits. You may not double dip expenses. In other words, if you received scholarships, grants, other tax-free assistance or have used educational expenses for one of the credits listed above you may not reuse that expense for other tax benefits. Gifts, bequests, or inheritances do not reduce your eligible expenses. Sometimes it is better to let your dependent claim the educational credit versus using them on your tax return. Take care not to over withdraw funds from other special educational funds like 529 college savings plans or Coverdell ESAs. If you use up all eligible college expenses against your credits and still have unmatched withdrawals from these special accounts you could subject yourself to a 10% tax penalty. Remember, like most tax provisions, these benefits are all subject to income limitations. To receive the maximum credits noted above your Modified Adjusted Gross Income must be below beginning phase-out amounts. When you reach the maximum phase-out amount you are no longer eligible for the tax benefit. For 2014 they are: Educational Benefits: 2014 Modified Adjusted Gross Income Phase-outs Filing status American Opportunity Credit Lifetime Learning Credit Student Loan Interest Single $80,000 – 90,000 $54,000 – 64,000 $65,000 – 80,000 Married Filing Joint 160,000 – 180,000 108,000 – 128,000 130,000 – 160,000