Key 2015 Tax Items

Taxpayer should beware of the following tax items as amounts have changed.

Interest exclusion for higher education. The interest on U.S. savings bonds redeemed to pay qualified higher education expenses may be tax-free. The exclusion is phased out at certain income levels, which are adjusted annually for cost-of-living increases. The phaseout for 2015 will begin at modified adjusted gross income (MAGI) above $77,200 ($115,750 on a joint return). For 2014, the corresponding figures are $76,000 and $113,950.

Qualified transportation fringe benefits. For 2015, an employee will be able to exclude up to $250 (same as for 2014) a month for qualified parking expenses, and up to $130 a month (same as for 2014) of the combined value of transit passes and transportation in a commuter highway vehicle.

Refundable child credit. For 2015, the child credit will be refundable to the extent of the greater of:

… 15% of earned income above $3,000 (same as for 2014), or

… for taxpayers with three or more qualifying children, the excess of the taxpayer’s social security taxes for the tax year over his earned income tax credit for the year.

Earned income tax credit. For 2015, the maximum amount of earned income on which the earned income tax credit will be computed is $6,580 for taxpayers with no qualifying children, $9,880 for taxpayers with one qualifying child, and $13,870 for taxpayers with two or more qualifying children. These amounts are up from $6,480, $9,720, and $13,650 for 2014.

The amount of disqualified income (generally investment income) a taxpayer may have before losing the entire earned income tax credit will be $3,400 for 2015 (up from $3,350 for 2014).

Education credits. For 2015, the Hope Scholarship Credit, under American Opportunity Tax Credit, will be an amount equal to 100% of qualified tuition and related expenses not in excess of $2,000 plus 25% of those expenses in excess of $2,000, but not in excess of $4,000 (same as for 2014). Accordingly, the maximum Hope Scholarship Credit for 2015 will be $2,500 (same as for 2014).

For 2015, a taxpayer’s MAGI in excess of $80,000 ($160,000 for a joint return) will be used to determine the reduction under in the amount of the Hope Scholarship Credit otherwise allowable.

For 2015, a taxpayer’s MAGI in excess of $55,000 ($110,000 for a joint return) will be used to determine the reduction in the amount of the Lifetime Learning Credit otherwise allowable.

Expensing. The amount that may be expensed under Code Sec. 179 for 2015 will be $25,000 (same as for 2014). For 2015, the expensing limit will be reduced when more than $200,000 of expensing-eligible property is placed in service (same as for 2014).

Adoption credit. For 2015, the credit allowed for an adoption of a child with special needs will be $13,400 (up from $13,190 for 2014). The maximum credit allowed for other adoptions will be the amount of qualified adoption expenses up to $13,400 (up from $13,190 for 2014).

For 2015, the credit will begin to phase out for taxpayers with MAGI in excess of $201,010 (up from $197,880 for 2014). The phaseout will be complete if MAGI is $241,010 (up from $237,880 for 2014).

Adoption exclusion. For 2015, the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs will be $13,400 (up from $13,190 for 2014). For 2015, the maximum amount that can be excluded from an employee’s gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee will be $13,400 (up from $13,190 for 2014).

For 2015, the amount excludable from an employee’s gross income will begin to phase out for taxpayers with MAGI in excess of $201,010 (up from $197,880 for 2014).

Student loan interest deduction. For 2015, the deduction phases out ratably for taxpayers other than joint filers with MAGI between $65,000 and $80,000 ($130,000 and $160,000 for joint filers).