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UNITED STATES TAX ISSUES
The Internal Revenue Service recently released for tax year 2015 annual inflation adjustments for more than 40 tax provisions including the tax rate schedules and other changes. The ones most relevant to U.S. citizens and residents working and residing outside the United States follow.
Effective Date
This revenue procedure applies to taxable years beginning in 2015.
Tax Rate Tables
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TABLE 1 — Section 1(a) — Married Individuals Filing Joint Returns and Surviving Spouses
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If Taxable Income Is:
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The Tax Is:
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Not over $18,450
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10% of the taxable income
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Over $18,450 but not over $74,900
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$1,845 plus 15% of the excess over $18,450
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Over $74,900 but not over $151,200
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$10,312.50 plus 25% of the excess over $74,900
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Over $151,200 but not over $230,450
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$29,387.50 plus 28% of the excess over $151,200
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Over $230,450 but not over $411,500
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$51,577.50 plus 33% of the excess over $230,450
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Over $411,500 but not over $464,850
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$111,324 plus 35% of the excess over $411,500
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Over $464,850
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$129,996.50 plus 39.6% of the excess over $464,850
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TABLE 2 — Section 1(b) — Heads of Households
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If Taxable Income Is:
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The Tax Is:
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Not over $13,150
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10% of the taxable income
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Over $13,150 but not over $50,200
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$1,315 plus 15% of the excess over $13,150
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Over $50,200 but not over $129,600
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$6,872.50 plus 25% of the excess over $50,200
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Over $129,600 but not over $209,850
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$26,722.50 plus 28% of the excess over $129,600
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Over $209,850 but not over $411,500
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$49,192.50 plus 33% of the excess over $209,850
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Over $411,500 not over $439,000
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$115,737 plus 35% of the excess over $411,500
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Over $439,000
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$125,362 plus 39.6% of the excess over $439,000
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TABLE 3 — Section 1(c) — Unmarried Individuals (other than Surviving Spouses and Heads of Households)
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If Taxable Income Is:
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The Tax Is:
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Not over $9,225
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10% of the taxable income
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Over $9,225 but not over $37,450
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$922.50 plus 15% of the excess over $9,225
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Over $37,450 but not over $90,750
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$5,156.25 plus 25% of the excess over $37,450
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Over $90,750 but not over $189,300
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$18,481.25 plus 28% of the excess over $90,750
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Over $189,300 but not over $411,500
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$46,075.25 plus 33% of the excess over $189,300
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Over $411,500 not over $413,200
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$119,401.25 plus 35% of the excess over $411,500
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Over $413,200
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$119,996.25 plus 39.6% of the excess over $413,200
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TABLE 4 — Section 1(d) — Married Individuals Filing Separate Returns
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If Taxable Income Is:
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The Tax Is:
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Not over $9,225
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10% of the taxable income
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Over $9,225 but not over $37,450
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$922.50 plus 15% of the excess over $9,225
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Over $37,450 but not over $75,600
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$5,156.25 plus 25% of the excess over $37,450
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Over $75,600 but not over $115,225
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$14,693.75 plus 28% of the excess over $75,600
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Over $115,225 but not over $205,750
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$25,788.75 plus 33% of the excess over $115,225
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Over $205,750 not over $232,425
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$55,662 plus 35% of the excess over $205,750
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Over $232,425
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$64,998.25 plus 39.6% of the excess over $232,425
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Unearned Income of Minor Children Taxed as if Parent’s Income (the “Kiddie Tax”)
The amount which is used to reduce the net unearned income reported on the child’s return that is subject to the “kiddie tax,” is $1,050. The same $1,050 amount is used to determine whether a parent may elect to include a child’s gross income in the parent’s gross income and to calculate the “kiddie tax”). One of the requirements for the parental election is that a child’s gross income is more than $1,050 but less than 10 times that amount; thus, a child’s gross income for 2015 must be more than $1,050 but less than $10,500.
Child Tax Credit
The value used to determine the amount of credit that may be refundable is $3,000.
Hope Scholarship, American Opportunity, and Lifetime Learning Credits
The Hope Scholarship Credit is an amount equal to 100 percent of qualified tuition and related expenses not in excess of $2,000 plus 25 percent of those expenses in excess of $2,000, but not in excess of $4,000. Accordingly, the maximum Hope Scholarship Credit allowable for taxable years beginning in 2015 is $2,500.
A taxpayer’s modified adjusted gross income in excess of $80,000 ($160,000 for a joint return) is used to determine the reduction in the amount of the Hope Scholarship Credit otherwise allowable. For taxable years beginning in 2015, a taxpayer’s modified adjusted gross income in excess of $55,000 ($110,000 for a joint return) is used to determine the reduction in the amount of the Lifetime Learning Credit otherwise allowable.
Standard Deduction
(1) In general, the standard deduction amounts are as follows:
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Filing Status
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Standard Deduction |
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Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(a))
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$12,600
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Heads of Households (§ 1(b))
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$9,250
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Unmarried Individuals (other than Surviving Spouses and Heads of Households) (§ 1(c))
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$6,300
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Married Individuals Filing Separate Returns (§ 1(d))
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$6,300
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Overall Limitation on Itemized Deductions
The applicable amounts are $309,900 in the case of a joint return or a surviving spouse, $284,050 in the case of a head of household, $258,250 in the case of an individual who is not married and who is not a surviving spouse or head of household, $154,950 in the case of a married individual filing a separate return.
Personal Exemption
(1) The personal exemption amount is $4,000.
(2) Phaseout. The personal exemption phases out for taxpayers with the following adjusted gross income amounts:
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Filing Status
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AGI – Beginning of Phaseout
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AGI – Completed Phaseout
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Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(a))
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$309,900
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$432,400
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Heads of Households (§ 1(b))
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$284,050
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$406,550
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Unmarried Individuals (other than Surviving Spouses and Heads of Households) (§ 1(c))
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$258,250
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$380,750
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Married Individuals Filing Separate Returns (§ 1(d))
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$154,950
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$216,200
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Eligible Long-Term Care Premiums
The limitations regarding eligible long-term care premiums includible in the term “medical care,” are as follows:
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Attained Age Before the Close of the Taxable Year
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Limitation on Premiums
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40 or less
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$380
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More than 40 but not more than 50
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$710
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More than 50 but not more than 60
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$1,430
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More than 60 but not more than 70
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$3,800
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More than 70
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$4,750
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Interest on Education Loans
The $2,500 maximum deduction for interest paid on qualified education loans begins to phase out for taxpayers with modified adjusted gross income in excess of $65,000 ($130,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $80,000 or more ($160,000 or more for joint returns).
Expatriation to Avoid Tax
An individual is considered a covered expatriate if the individual’s “average annual net income tax” for the five taxable years ending before the expatriation date is more than $160,000.
Tax Responsibilities of Expatriation
The amount that would be includible in the gross income of a covered expatriate is reduced (but not below zero) by $690,000.
Foreign Earned Income Exclusion
The foreign earned income exclusion amount is $100,800.
Unified Credit Against Estate Tax
For an estate of any decedent dying during calendar year 2015, the basic exclusion amount is $5,430,000 for determining the amount of the unified credit against estate
Annual Exclusion for Gifts
(1) The first $14,000 of gifts to any person (other than gifts of future interests in property) is not included in the total amount of taxable gifts made during that year.
(2) The first $147,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts made during that year.
Notice of Large Gifts Received from Foreign Persons
Code Section 6039F authorizes the Treasury Department and the Internal Revenue Service to require recipients of gifts from certain foreign persons to report these gifts if the aggregate value of gifts received in the taxable year exceeds $15,601.
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