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Trick or Treat: The IRS Releases New Administrative Authority Governing 2015 Tax Rate and Deduction Levels



The Internal Revenue Service (hereinafter the “Service”) released today new administrative authority for calendar year 2015 within Revenue Procedure 2014-61 that makes adjustments to more than 40 tax provisions, including the tax rate schedules, deduction levels, and many other tax provisions. It should be duly noted that Revenue Procedure 2014-61, is scheduled to be published in the Internal Revenue Bulletin 2014-47 on Monday, November 17, 2014 and can be cited here.

The primary adjustments included within this new administrative authority include, but are certainly not limited to:

• The tax rate of 39.6% affects singles whose income exceeds $413,200 (i.e., $464,850 for married taxpayers filing a joint return), up from $406,750 and $457,600, respectively. The other marginal rates (i.e., 10%, 15%, 25%, 28%, 33% and 35%) and the related income tax thresholds are described in the revenue procedure;

• The standard deduction 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 calendar year 2014. The standard deduction for heads of household rises to $9,250, up from $9,100;

• The limitation for itemized deductions to be claimed in calendar year 2015 returns of individuals begins with incomes of $258,250 or more (i.e., $309,900 for married couples filing jointly);

• The personal exemption for calendar year 2015 rises to $4,000, up from the 2014 exemption of $3,950. Though, the exemption is subject to a phase-out that begins with adjusted gross incomes of $258,250 (i.e., $309,900 for married couples filing jointly). It phases out completely at $380,750 (i.e., $432,400 for married couples filing jointly.);

• The Alternative Minimum Tax exemption amount for tax year 2015 is $53,600 (i.e., $83,400, for married couples filing jointly). The 2014 exemption amount was $52,800 (i.e., $82,100 for married couples filing jointly);

• The 2015 maximum Earned Income Credit amount is $6,242 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,143 for tax year 2014. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-out’s;

• Estates of decedents who die during 2015 have a basic exclusion amount of $5,430,000, up from a total of $5,340,000 for estates of decedents who died in 2014;

• The annual exclusion for gifts remains at $14,000 for 2015;

• For 2015, the exclusion from tax on a gift to a spouse who is not a U.S. citizen is $147,000, up from $145,000 for 2014;

• For 2015, the foreign earned income exclusion breaks the six-figure mark, rising to $100,800, up from $99,200 for 2014;

• The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) rises to $2,550, up $50 dollars from the amount for 2014; and

• Under the small business health care tax credit, the maximum 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 calendar year 2015, up from $25,400 for 2014.

For legislative updates from Capitol Hill and complete coverage of the latest statutory, administrative, and judicial interpretations please connect with Peter J. Scalise on TaxConnections.

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Peter J. Scalise serves as the Federal Tax Credits & Incentives Practice Leader for Prager Metis CPAs, LLC a member of The Prager Metis International Group. Peter is a highly distinguished BIG 4 Alumni Tax Practice Leader and has approximately twenty years of progressive public accounting experience developing, managing and leading multi-million dollar tax advisory practices on both a regional and national level.

Peter is a highly acclaimed thought leader in the fields of accounting and taxation with deep subject matter expertise in connection to designing, implementing and defending sustainable methodologies for specialty tax incentives including, but not limited to, research tax incentives; orphan drug credits; therapeutic discovery credits; accounting methods and periods; energy tax incentives in connection to green building envelope efficiency and benchmarking, solar energy, bio energies, fuel cells, wind turbines, micro turbines, and geothermal systems; and comprehensive fixed asset analysis incorporating principles of construction tax planning, cost segregation analysis and the final treasury regulations governing tangible property.

Peter is a renowned keynote speaker and an extensively published author on specialty tax incentives, tax controversy matters, and legislative updates from Capitol Hill for NAREIT, AGRION, USGBC, AICPA, ASTP, NATP, ABA, AIA, and TEI. Peter serves as a member of the Tax Faculty for CPAacademy, iShade and TaxConnections University (“TCU”). Peter serves on both the Board of Directors and Board of Editors for The American Society of Tax Professionals (“ASTP”) and is the Founding President and Chairman of The Northeastern Region Tax Roundtable.