Personal Income Tax Mary B Pearson, CPA Assistant Professor of Accounting

Topics Discussed: New Income Tax Legislation ◦ Tax Brackets  Individual  Capital Gains  Investment Tax ◦ Standard Deduction/Exemption ◦ Itemized Deductions/Sch A ◦ HSA Accounts ◦ Tax Credits ◦ Student Loan Interest Deduction ◦ Retirement Questions Q&A

Taxes?!

2015 Tax Brackets Tax RateSingleMarried Filing Joint 10%$0 - $9,225$0 - $18,450 15%$9,226 - $37,450$18,451 - $74,900 25%$37,451 - $90,750$74,901 - $151,200 28%$90,751 - $189,300$151,201 - $230,450 33%$189,301 - $411,500$230,451 - $411,500 35%$411,501 - $413,200$411,501 - $464, %Over $413,200Over $464,850

Capital Gains Tax Rates Long Term Capital Gains tax is imposed on sale of investment assets (stocks, land, rental property) where the sales price exceeds your basis. In 2015, the new capital gains tax rate for individuals in the 10-15% tax bracket is 0%, % tax bracket is 15%. Still favorable tax treatment on sale of personal residences!

Investment Income Tax Rates Additional 3.8% tax on Net Investment Income if: ◦ Adjusted Gross Income in excess of $200,000 single or $250,000 MFJ Additional Medicare Tax of.9% of individuals with Adjusted Gross Income in excess of: ◦ $200,000 Single ◦ $250,000 MFJ

Exemption/Standard Deduction Amounts Exemption amount = $4,000 per dependent Standard Deduction Filing StatusAmount Single$6,300 Married Filing Joint$12,600 Head of Household$9,250 Married Filing Separate$6,300

Itemized Deductions Medical and Dental Expenses in excess of 10% of AGI (Not expenses paid out of HSA funds) State Income Tax paid in 2015 or General Sales Tax Real Estate Tax Personal Property Tax if not a Utah Resident

More Itemized Deductions Mortgage Interest & Points paid on Primary Residence 1 st and 2 nd Mortgage & Mortgage Interest on Second Home. Mortgage Insurance Premiums Cash & Non-Cash Charitable Gifts & Mileage deductible at 14 cents per mile

More Itemized Deductions Employee Business Expenses in excess of 2% of AGI ◦ Mileage at 57.5 cents per mile ◦ Publications, Books, Supplies ◦ Conferences ◦ Travel Expenses ◦ Tax Return Preparation Fees

Medical Expense Deduction Take Advantage of Health Savings Accounts (HSA) ◦ Tax Free Contributions up to $6,650 per family, $3,350 individually ◦ New threshold for medical and dental deduction is 10% for taxpayers under 65 makes it harder to deduct expenses as an itemized deduction.

Taxes?!

What tax credits can I take? Child & Dependent Care Credit Retirement Savings Credit: Eligible if you contribute to a Retirement Account and AGI is less than $61,000. (10% credit) Child Tax Credit: $1,000 for each eligible dependent under the age of 17. AGI cannot be greater than $130,000 MFJ. Residential Energy Credits Education Credits!!! Adoption Credit: $13,400

What Education Expenses can I deduct? ItemEducationAmountCovered Expenses Income Phase Out American Opportunity Credit 4 years of Post Secondary Education $2,500 per yr & student 40% of credit is refundable Tuition, Fees, Books, and Supplies $180,000 MFJ $90,000 Single Lifetime Learning Credit Post Secondary $2,000 per taxpayer 20% of expenses Tuition, Fees, Books, and Supplies $122,000 MFJ $61,000 Single Tuition & Fees Deduction Post Secondary $4,000 per year Qualified Tuition & Fees $160,000 MFJ $80,000 Single/Hof H

Can I deduct Student Loan Interest? Student Loan Interest: Can deduct up to $2500 if AGI is less than $75,000 Single, $150,000 MGJ

Can I contribute to a Roth IRA? Roth IRA: Non Deductible ◦ Can contribute up to $5500 if under 50 and $6500 if over 50 and: ◦ AGI is less than $188,000 MFJ ◦ AGI is less than $127,000 Single

Can I withdraw my 401K early? Yes, but you will pay a penalty of 10% if not used for: ◦ Unreimbursed medical expenses or medical insurance premiums if over 10% of your AGI ◦ Total or Permanent Disability ◦ Higher Education Expenses ◦ Purchase of your first home ◦ IRS levy ◦ Qualified Reservist Distribution