Do you know your limits for 2015?
I know the idea of reviewing one’s cash flow situation is probably not cracking your list of new and exciting priorities to tackle right out of the New Year’s gate. But staying on top of key financial numbers for cash flow and tax planning purposes could give you the opportunity to further maximize savings, reduce taxes, and continue towards building a bigger and brighter future. Consequently, I want to share one of the more concise resources that compiles key IRS tables for the 2015 calendar year, produced by the College for Financial Planning®.
For individuals, no groundbreaking changes or overhauls to the tax system were introduced, but there are slight adjustments to last year’s limits to account for cost of living increases. This includes higher (albeit minor) savings limits, no income tax rate increases, and broad but slight increases to income limits (including exemptions, deductions, and credits).
One area for individuals to easily take advantage of includes maximizing contributions into your company’s retirement plan. For example, 401(k) salary deferrals increased by $500 to $18,000 for the year, plus the catch-up provision for those above age 50 increased by $500 to $6,000. If you participate in a Health Savings Account (HSA), you should also adjust your annual contributions to the updated maximum limits of $3350 for individuals and $6650 for families (no change to the $1000 catch-up provision for those age 55 or older). While these amounts aren’t substantial, the discipline of taking advantage of these opportunities are the type of behaviors that will positively serve you and your wealth over time.
As it relates to business owners, the Section 179 Deduction was mightily reduced from the tax extender benefits offered in 2013 and 2014. Essentially this tax incentive allows owners to invest in their businesses by adding needed equipment while keeping more of their capital. For the last few years this included a deduction limit up to $500,000 on a $2 million investment ceiling, along with a 50% bonus depreciation in the first year. In 2015, the deduction limit drops to $25,000 with a $200,000 investment ceiling, and the 50% bonus depreciation kicker disappears. forum Time will tell if these greater tax benefits are reinstated for 2015, but currently Section 179 packs a much lighter punch.
Our Strength Based Wealth Management (SBWM) process includes the right systems, structure, support, and discipline needed to master one’s wealth. By optimizing your cash flow consistently and staying abreast of current tax laws and limits, you give yourself a greater opportunity to grow your balance sheet, your portfolio, and your total net worth.