Even though we’re into the second half of the year, it’s not too late to take advantage of some cool tax changes in 2015. Specifically, if you contribute to retirement plans, contributions limits have expanded across the board and more options are available. That means you can sock more money into those plans than ever before. And if you do that you’ll have a much more secure financial future. Sounds good…right? Let’s look at the most important improvements you can take advantage of this year:
1. Higher Contribution Limits
This year, you can deposit up to $18,000 of your gross pay into a 401k or other employer-sponsored plan.
If you own a small business or are self-employed it gets better. You can plop up to 20% of your pay (or $53,000) into a SEP or solo 401k.
If you don’t have access to a plan at work, you can always contribute $5500 to a traditional IRA or Roth. If you are 50 years old or more, the limits goes up $6500. That’s nothing to sneeze at buddy.
2. Easier to Contribute To A Roth
A Roth isn’t a fit for everyone. But the younger you are, the better it looks. You don’t score an immediate tax deduction like you do with a standard IRA or 401k contribution but the money grows tax free and you can also withdraw the money tax free down the line. For some people it’s a great deal.
While you might want to take advantage of the Roth, there are income limits. Above those limits the amount you can deposit into a Roth phases out.
The good news is those limits were raised for 2015. If you are married you can still make the maximum Roth contribution if your income is below $183,000. From $183,000 to $193,000 the amount you can deposit into the Roth phases out. For singles, the phase out threshold starts at $116,000 and ends at $131,000.
If you’re looking to set up an IRA for 2015 check out Tradeking. They are inexpensive and have great tools for the beginner investor.
3. 401k PLUS IRA?
Even if you have a retirement plan available at work you still may be able to make a deductible IRA contribution if your income is below the threshold. For single tax filers, the deduction phases out from $61,000 to $71,000. Once your AGI hits that, it’s no IRA deduction for you.
If you are married and you have a plan at work, your IRA deduction phases out between $98,000 and $118,000. If it’s your spouse who has the plan however, the phase out starts at $183,000 and ends at $193,000.
The good news just keeps coming. If you are, single or file separately, you can claim a $2000 tax credit if you earn $30,500 or less. If you file as head of household, the credit is yours as long as your earn $47500 or less. Married couples can claim the tax credit so long as their income is $61,000 or less in 2015.
The year is 50% gone. Don’t wait any longer to take advantage of these financial opportunities. The government is giving you a huge incentive to save for your future. Are you going to take advantage of these tax inducements? If not, why not?
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