Tax Extenders Bill for 2015

There are about 50 tax provisions that Congress will consider at the last minute again this year which may affect your 2015 tax return. These include section 179 depreciation which is now capped out at only $25,000, 50% bonus depreciation, state and local sales tax deduction, teacher expense deduction of $250, mortgage insurance premium deduction, energy efficient home improvement tax credit, and the qualified charitable distribution out of your IRA up to $100,000 which counts toward your required minimum distribution. Look for a decision on the bill on Friday, December 18 which is the day Congress leaves on Christmas vacation.

Social Security Strategies

The recent budget agreement signed into law on November 2, 2015 ended two popular claiming strategies for married couples; file and suspend, and a restricted application for spousal benefits only. Both strategies involve elections for one spouse to continue to earn deferral credits from full retirement age 66 to age 70 while spousal benefits are claimed. The claiming methods have been available since 2000.  Each year of deferral credit increases monthly social security benefits by 8%. Couples that have already used these strategies are grandfathered in and there are transition rules allowing a spouse to claim on their spouse's suspended benefit by May 1, 2016. If you are 62 by the end of 2015, you can still file a restricted application for spousal benefits when you reach age 66 provided your spouse is at full retirement age.

Nondeductible Taxes

Federal taxes are nondeductible such as the income tax, social security, medicare, gift, estate, excise, and Obamacare tax. Also custom duties, penalties and fines such as parking tickets and speeding tickets, and personal licenses like a dog license are not deductible.

2016 Inflation Adjustments for Tax Provisions

The IRS announced inflation adjustments for more than 50 tax provisions for 2016 on October 21, 2015. Some of the major ones are below:

1. The personal exemption rose from $4,000 to $4,050.
2. The standard deduction for singles and joint returns remained at $6,300 and $12,600 respectively.
3. The top rate of 39.6 percent applies at $415,050 for singles and $466,950 for joint returns. This is up from $413,200 and $464,850.
4. The basic exclusion for estates increased to $5,450,000 from $5,430,000.
5. The foreign earned income exclusion went from $100,800 to $101,300.