May 22, 2015 12:06 pm

Over 30 Tax Items that Never Change

Each year the IRS announces cost-of-living adjustments to dozens of tax items, including standard deductions, personal exemptions, and retirement plan contribution limits. But there are some dollar amounts fixed by statute or by the IRS; they are not adjusted annually for inflation. Some of these dollar limits have been in the tax law for more than 50 years. Here’s roundup of 33 tax limits that remain unchanged to help you plan for 2015.

  1. Additional Medicare tax on earned income: The 0.9% tax applies to earnings of singles over $200,000 ($250,000 for joint filers; $125,000 for married persons filing separately).
  2. Additional Medicare tax on net investment income: The 3.8% tax applies to the lesser of net investment income or MAGI over $200,000 ($250,000 for joint filers; $125,000 for married persons filing separately).
  3. Alimony frontloading: An alimony payment can be characterized as a nondeductible property settlement if there is a decline in payments by more than $15,000 during the first three years of alimony.
  4. Below-market loans: The imputed interest rules do not apply to “gift” loans up to $10,000 ($100,000 for the purchase of a home if the borrower’s investment income does not exceed $1,000).
  5. Business cruises: The deduction of business meetings held on cruise ships outside the North American area is limited to $2,000.
  6. Business gifts: The deduction is capped at $25 (a dollar limit that hasn’t changed since 1962).
  7. Business travel receipts: No receipts for travel expenses (other than lodging) are required for expenditures up to $75.
  8. Capital loss offset to ordinary income: Capital losses in excess of capital gains can offset up to $3,000 of ordinary income ($1,500 for married persons filing separately).
  9. Casualty loss deduction: In figuring the deductible amount of a casualty loss, each such event must be reduced by $100. Note: This dollar amount, which has been in the tax law since 1964, had been increased to $500 for 2009 and it was eliminated for the Katrina, Rita, and Wilma disasters.
  10. Child tax credit: The credit limit per child under age 17 is capped at $1,000.
  11. Deduction for buying heavy SUVs for business: While modest depreciation limits apply for the purchase of most cars, trucks, and vans for business, a $25,000 first-year limit applies for heavy SUVs.
  12. Dependent care assistance: Employees can exclude up to $5,000 of employer-provided dependent care assistance (or make an elective salary deferral to a dependent care FSA up to this dollar limit).
  13. Dependent care credit: The maximum amount of expenses that can be taken into account in figuring the credit is capped at $3,000 for one dependent or $6,000 for two or more dependents.
  14. Driving for charity: If you use your car for charitable purposes, you can deduct your mileage at the rate of 14¢ per mile.
  15. Education assistance: Employees are not taxed on employer-provided education assistance up to $5,250 annually, whether or not job related.
  16. Educator deduction: Assuming that the rule that expired at the end of 2013 is extended, educators can deduct $250 as an adjustment to gross income.
  17. Employee achievement and safety awards: Employers can deduct (and employees are not taxed on) awards up to $1,600 if made under a plan (qualified awards), or $400 for nonqualified awards.
  18. Estimated tax penalty exception for high-income taxpayers: To avoid underpayment penalties, one exception is to pay 100% of the prior year’s taxes in through withholding and estimated tax, but those who are high income must pay 110%. High income for this purpose means adjusted gross income of $150,000 ($75,000 if married filing separately).
  19. Estimated tax penalty threshold: There’s no penalty for underpaying estimated taxes if the underpayment is no more than $1,000.
  20. Group-term life insurance: Employers can pay for coverage up to $50,000 without any tax to employees; coverage over this threshold is taxable.
  21. Home sale exclusion: Gain on the sale of a principal residence is tax free up to $250,000; $500,000 for married persons filing jointly.
  22. IRA penalty exception for firsttime home-buying expenses: The maximum distribution from IRAs that is free from the 10% early distribution penalty is $10,000.
  23. Non-dealer sales of business property or realty: An interest charge is imposed on a tax-deferred payment of over $150,000 on an installment sale of over $5 million.
  24. Phase-out of exemptions: Personal and dependency exemptions are phased out over an adjusted gross income range of $122,500 ($61,250 for married persons filing separately).
  25. Repayments of certain tax items: A miscellaneous itemized deduction (not subject to the 2% AGI floor) for the repayment of income can be claimed up to $3,000 (or repayment may qualify for a tax credit of previously paid taxes).
  26. Retirement plan loans: The most a plan participant can borrow from a qualified retirement plan is $50,000.
  27. Retirement savers credit: The maximum amount of retirement plan and IRA contributions that can be taken into account in figuring the credit is capped at $2,000.
  28. Rollover from publicly traded securities to SSBIC: There are annual and lifetime limits on the deferral gain for a rollover to a specialized small business investment company. The deferral limit each year is the smaller of (1) $50,000 ($25,000 for married persons filing separately), or (2) $500,000 ($250,000 for married persons filing separately) minus any previously deferred gains.
  29. Section 1244 losses: Losses on certain small business stock can be treated as ordinary losses rather than capital losses up to $50,000 ($100,000 for joint filers).
  30. Self-employment tax: No tax payment is required if net earnings from self-employment are not at least $400.
  31. Student loan interest deduction: The maximum annual deduction is $2,500.
  32. Tax tables: They can be used for figuring the income tax of individuals who have taxable income up to $100,000, regardless of filing status.
  33. Tuition and fees deduction: Assuming that the rule that expired at the end of 2013 is extended, then a deduction for higher education tuition and fees from gross income can be claimed up to $4,000 (or $2,000), depending on income.

Conclusion

If Congress does comprehensive tax reform in the coming year, then some of these items could very well change for 2015 or later. We’ll keep you posted!

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Tax Glossary

Profit-sharing plan

A defined contribution plan under which the amount contributed to the employees’ accounts is based on a percentage of the employer’s profits.

More terms