Greetings all! With 2015 right around the corner, it’s time to start our tax planning. It looks like the standard deduction and personal exemption amounts are going to increase in 2015*. It also appears that the child tax credit will remain at $1,000 per child. These increases in the standard deduction and personal exemptions mean that the government will allow us to earn more money before it expects us to pay federal income tax.
|2015 Free Money for Federal Income Taxes|
|Standard Deduction||Married Filing Jointly||$12,600|
|Personal Exemptions||$4,000 * 3||$12,000|
|1 Child Tax Credit||$1,000 / .10||$10,000|
|2015 Total Free Money||$34,600|
|Total Free Money||$34,600|
|Remainder of 10% Tax Bracket||$8,450|
|Free Money + 10% Bracket||$43,050|
|Effective tax rate of 1.96%|
What if we need even more money? In that case, we would realize that all money after $43,050 would be taxed at the 15% federal income tax rate. In other words, every $1,000 beyond the 10% bracket would carry a tax obligation of $150. Not too bad, but certainly more than we paid in the 10% bracket. However, just being aware of our tax breakpoints will enable us to make informed tax decisions in 2015.
I hope this helps you hammer your financial plans in 2015. What do you think? Did I forget anything?