IRS Tax Bracket for 2015 and Standard Deduction

The IRS Tax Bracket for 2015 tax is different, yet similar to the tax bracket for 2014. Every year, the IRS adjusts more than 40 tax provisions for inflation to make sure the numbers do not get out of whack with what is going on in the economy.

 

 

IRS Tax Bracket for 2015 and Standard Deduction

This is done to prevent what is called “bracket creep.” and occurs when people are pushed into higher income tax brackets or have reduced value from credits or deductions due to inflation. Tax rates often vary by tax year and may be different for each filing status.

 

Choosing Correct Tax Filing Status for 2015

It is very important to accurately identify your filing status in order to ensure you are using the right IRS tax bracket for 2015. Specifically,  for tax year 2015, the IRS announced annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2014-61 provides details about these annual adjustments and some of the most important changes to the tax brackets for 2015 are addressed below beginning more importantly with the tax bracket for single, married join, and head of household tax filers.

 

IRS Tax Bracket for 2015

Tax Rate Single Married/Joint
& Widow(er)
Married/Separate Head of Household
10% $1 – $9,075 $1 – $18,150 $1 – $9,075 $1 – $12,950
15% $9,076-$36,900 $18,151 to $73,800 $9,076 to $36,900 $12,951 to $49,400
25% $36,901 to $89,350 $73,801 to $148,850 $36,901 to $74,425 $49,401 to $127,550
28% $89,351 to $186,350 $148,851 to $226,850 $74,426 to $113,425 $127,551 to $206,600
33% $186,351 to $405,100 $226,851 to $405,100 $113,426 to $202,550 $206,601 to $405,100
35% $405,101 to $406,750 $405,101 to $457,600 $202,551 to $228,800 $405,101 to $432,200
39.6% over $406,750 over $457,600 over $228,800 over $432,200

 

3.8% federal Medicare tax

Furthermore, Additional 3.8% federal Medicare tax applies to individuals on the lesser of net investment income or modified AGI in excess of $200,000 (single) or $250,000 (married/filing jointly and qualifying widow(er)s). Also applies to any trust or estate on the lesser of undistributed net income or AGI in excess of the dollar amount at which the estate/trust pays income taxes at the highest rate.

 

IRS Standard Deduction for 2015

In addition to changes in the tax brackets for 2015, all taxpayers will see a slight bump in the standard deduction which is also adjusted for inflation. The standard deduction in 2015 rises to $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly, up from $6,200 and $12,400, respectively, for tax year 2014. The standard deduction for heads of household rises to $9,250, up from $9,100 in tax year 2015. Remember, that with all these values, this will be for taxes in 2015 and not for taxes in 2014. Furthermore, the personal exemption rose by $50 in 2015 to $4,000. The personal exemption is subject to a phase-out that begins with AGI of $258,250 ($309,900 for married couples filing jointly). It phases out completely at $380,750 ($432,400 for married couples filing jointly). This means that couples above these income limits will start seeing a reduction in their personal exemptions.

 

2015 Personal Exemption Amounts

You are allowed to claim one personal exemption for yourself and one for your spouse (if married). However, if somebody else can list you as a dependent on their tax return, you are not permitted to claim a personal exemption for yourself. For tax year 2015, the personal exemption amount is $4,000 (up from $3,950 in 2014).

The personal exemption amount “phases out” for taxpayers with higher incomes. The Personal Exemption Phaseout (PEP) thresholds are as follows:

Filing Status PEP Threshold Starts PEP Threshold Ends
Single $258,250 $380,750
Married Filing Jointly $309,900 $432,400
Married Filing Separately $154,950 $216,200
Head of Hosuehold $284,050 $406,550

 

2015 Limitation on Itemized Deductions

As in 2013 and 2014, the amount of itemized deductions which you are allowed to claim is reduced  by 3% of the amount by which your adjusted gross income exceeds certain threshold amounts. These threshold amounts are the same as the lower threshold amounts listed above for the personal exemption phaseout (e.g., $258,250 for single taxpayers). However:

  1. Your itemized deductions cannot be reduced by more than 80% as a result of this limitation, and
  2. Your itemized deductions for medical expenses, investment interest expense, casualty/theft losses, and gambling losses are not reduced as a result of this limitation.

 

Other Important Tax Increases for 2015

In addition the changes in the 2015 tax bracket, there are also several other important tax increases that occurred in 2015.

  • The 2015 maximum Earned Income Credit (EIC Credit) amount is $6,242 for taxpayers filing jointly who have 3 or more qualifying children that are eligible for the EITC, This is up from a total of $6,143 for tax year 2014. The IRS has information on the earned income credit and a table providing maximum credit amounts for other categories, income thresholds and phaseouts.
  • The small business health care tax credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,800 for tax year 2015, up from $25,400 for 2014.
  • Lastly, the Alternative Minimum Tax (AMT) exemption amount for tax year 2015 is $53,600 ($83,400, for married couples filing jointly). The 2014 exemption amount was $52,800 ($82,100 for married couples filing jointly). The AMT is something that taxpayers in certain taxpayers must pay. Online tax preparation software will have all the information needed to calculate returns using the updated tax bracket information for 2015.

 

2015 IRA and 401(k) Contribution Limits

For 2015, the contribution limit to Roth and traditional IRAs is unchanged at $5,500, with an additional catch-up contribution of $1,000 for people age 50 or older.

The contribution limit for 401(k), 403(b), and most 457 plans, however, is increased to $18,000, with an additional catch-up contribution of $6,000 for people age 50 or older. The maximum possible contribution for defined contribution plans is increased from $52,000 to $53,000.

 

More Information about 2015 and 2016 Earned Income Tax credit (2015 EIC)