As we approach spring, most of us are focused on filing our 2014 taxes. However, it is never too early to start planning for next year. For example, if you are an employee, you may have a better idea of how much money to withhold so you can avoid being stuck with a tax bill on April 15. It all comes down to how many exemptions you claim. The fewer exemptions you claim, the more money will be taken out of your paycheck, and vice versa. 
Aside from withholding, there are some important tax law changes you should take into account when you plan for next year. Here are five of them:
Higher 401K Contribution Limits: If you have a 401k (or 403b) plan offered by your employer, you should be taking advantage of it. This is particularly true if your employer matches any percentage of your contribution. For 2015, contribution limits to employer retirement plans rise from $17,500 to $18,000. If you are 50 or older at any time during the 2015 tax year, you may also take advantage of the “catch up” clause, which allows you to contribute an additional $6,000 to your plan. Self Employed Plans (SEPs) will also have a limit increase from $52,000 to $53,000.
Higher Income Threshold for IRA Deductions: Contribution limits to individual retirement accounts (IRAs) will remain unchanged for 2015; $5500 for individuals with $1000 catch up for those 50 and over. However, the income threshold for being able to deduct IRA contributions will increase by $2,000.
Rules Change for Health Savings Account (HSA) Eligibility: Since 2013, the IRS has allowed taxpayers with flexible spending accounts (FSAs) to carry forward up to $500 of unused funds into the subsequent tax year. This benefit is still in effect, but now there’s a catch. If you do carry forward money from an FSA, you will not be eligible to possess a heath savings account. So if you have both an FSA and HSA, be sure to spend everything in your FSA during the tax year going forward.
IRA Rollover Limitations: Starting in the 2015 tax year, taxpayers are allowed only one “free” IRA-to-IRA rollover per 12-month period. If you have a second rollover within the same 12 months, you are subject to income taxes, penalties and an excess contributions tax. This change does not affect 401K-to-IRA rollovers, IRA-to-401K rollovers or 401K-to-401K rollovers, so no need to worry if you have multiple job changes in the same year.
Penalty Increases for Not Having Health Insurance: For 2014, the penalty for not carrying “minimum essential” health coverage was fairly benign; $95 per adult, $47.50 per child up to a maximum of $285 per family or 1% of your income, whichever is higher. The income percentage doubles this year to 2% and the fine goes up to $325 per adult, $162.50 per child up to a maximum of $975 per family.
Tax laws are changing constantly and it takes a full time professional to keep on top of the changes and discern what they mean to the average taxpayer. For the latest updates and tips on how to effectively plan your 2015 taxes, contact a local accounting firm and speak with a tax specialist.