Since 2015 is upon us, our firm feels that now is a good time to begin looking at some of the most significant new tax breaks, penalties, and restrictions that will affect taxpayers this year. This week we will mention some of the biggest changes that individual taxpayers will face in the upcoming year.
The good news is that any changes individuals will face coming year come in the form of minimal increases to tax rates, and related tax thresholds, which have changed slightly due to 2015 inflation adjustments. There are, however, two significant tax changes, a restriction and a penalty, that individuals must be aware of in 2015.
The first major change is a new restriction imposed on individual taxpayers regarding the amount of times that they can make a tax free rollover of one IRA into another IRA in any 12-month period.1 Previously, taxpayers were able to make as many tax free withdrawals of money from their IRA as long as they: (i) replaced the amount that was withdrawn into another eligible retirement plan within 60 days of the initial withdrawal, and (ii) had not made a previous rollover, with regards to the same IRA, within the previous 12 months.
Since the tax free rollover rule was allowed on an account-by-account basis, individuals, effectively, could make unlimited interest-free loans to themselves as long as they were rolled over different IRA accounts and repaying the money within 60 days. Beginning in 2015, however, the “one rollover per 12-month rule” now applies to all IRAs owned by a taxpayer.2
The second major change that individuals taxpayers now face is the penalty for not having health insurance as mandated in the Affordable Care Act (the “ACA”). Prior to this New Year, individuals who did not have health insurance were subject to the following penalty: (i) 1% of the head of household’s annual income; or (ii) $95 per person, whichever amount was greater. Now, however, the penalty for a lack of health care coverage has increased to the greater of: (i) 2% of the head of household’s annual income; or (ii) $325 per person.3 These changes represent a significant increase in the applicable penalty that an individual will face for not being insured -- especially when compared with the generally nominal inflation-adjusted increase of most US tax breaks.
1Internal Revenue Service Announcements 2014-15 and 2014-32.
2Bobrow v. Commissioner, T.C. Memo. 2014-21.
3Congressional Research Service, Individual Mandate Under ACA, p.3.
The good news is that any changes individuals will face coming year come in the form of minimal increases to tax rates, and related tax thresholds, which have changed slightly due to 2015 inflation adjustments. There are, however, two significant tax changes, a restriction and a penalty, that individuals must be aware of in 2015.
The first major change is a new restriction imposed on individual taxpayers regarding the amount of times that they can make a tax free rollover of one IRA into another IRA in any 12-month period.1 Previously, taxpayers were able to make as many tax free withdrawals of money from their IRA as long as they: (i) replaced the amount that was withdrawn into another eligible retirement plan within 60 days of the initial withdrawal, and (ii) had not made a previous rollover, with regards to the same IRA, within the previous 12 months.
Since the tax free rollover rule was allowed on an account-by-account basis, individuals, effectively, could make unlimited interest-free loans to themselves as long as they were rolled over different IRA accounts and repaying the money within 60 days. Beginning in 2015, however, the “one rollover per 12-month rule” now applies to all IRAs owned by a taxpayer.2
The second major change that individuals taxpayers now face is the penalty for not having health insurance as mandated in the Affordable Care Act (the “ACA”). Prior to this New Year, individuals who did not have health insurance were subject to the following penalty: (i) 1% of the head of household’s annual income; or (ii) $95 per person, whichever amount was greater. Now, however, the penalty for a lack of health care coverage has increased to the greater of: (i) 2% of the head of household’s annual income; or (ii) $325 per person.3 These changes represent a significant increase in the applicable penalty that an individual will face for not being insured -- especially when compared with the generally nominal inflation-adjusted increase of most US tax breaks.
1Internal Revenue Service Announcements 2014-15 and 2014-32.
2Bobrow v. Commissioner, T.C. Memo. 2014-21.
3Congressional Research Service, Individual Mandate Under ACA, p.3.
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