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Tax laws are incredibly complex, and constant changes are necessary to keep the tax system functioning smoothly. 2015 wasn't a huge year for tax reform, but there were still some important provisions that could help you save money on your taxes in the coming tax season and beyond. Let's take a look at three of the biggest headlines about taxes in 2015.
Key tax extenders become permanentCongress and the White House have routinely gone through an annual exercise with tax-law extensions, leaving the renewal of dozens of key tax breaks until the last possible moment. In 2015, however, the usual tax extender package of legislation came with some twists, as legislators agreed to make some provisions permanent despite the budgetary cost of doing so.
In particular, enhanced child tax credit, American Opportunity educational tax credit, and earned income tax credits will remain at their current levels permanently, and teachers will no longer have to worry about whether their annual $250 deduction for out-of-pocket classroom costs will get renewed. Another key provisions gives taxpayers the right to deduct state sales taxes instead of state income taxes as itemized deductions, and charitable IRA donations will be allowed.
On the business side, several key tax breaks will also become permanent. These include the coveted research and development credit, along with enhanced deductions for capital spending on what would ordinarily be depreciable property.
These permanent extensions remove a lot of uncertainty that had previously existed in the tax code. Not all of the annual provisions have been made permanent, but these key tax laws will help many individual and corporate taxpayers.
Obamacare Cadillac tax delayed until 2020The Affordable Care Act has introduced several new taxes to the pantheon of tax law, but one of the most feared wasn't scheduled to take effect until 2018. The so-called Cadillac tax was designed to give employers an incentive to ensure that their employees would bear a minimum portion of the out-of-pocket cost of their healthcare, charging a 40% excise tax on costs of employee health insurance above a certain threshold. Yet the provision was controversial, as it pitted the government against many employees covered by labor unions who generally supported Obamacare but have also negotiated valuable health benefits that could have fallen under the Cadillac tax.
As part of the year-end tax package, lawmakers delayed in the implementation of the Cadillac tax until 2020. Many still believe that the Cadillac tax should be repealed entirely, but others think that it's an essential element of ensuring that covered workers don't put unnecessary stress on the healthcare system by using benefits on care they don't actually need. Despite support for the tax among the academic community, politicians generally dislike it, making the move to delay the Cadillac tax unsurprising.
The wealthiest Americans are paying more in taxLast but not least, the IRS released data near the end of the year showing that taxes on America's 400 wealthiest taxpayers jumped sharply after increases in the highest income tax bracket took effect in 2013. The latest available data from the 2013 tax year showed that the top 400 paid an average tax rate of 22.9% in 2013, which was a huge jump from 2012's average rate of 16.7%.
Two primary changes in 2013 led to the big increase in tax rates on the wealthy. First, tax cuts from the early 2000s were allowed to expire, restoring the top 39.6% tax bracket to tax highest-income taxpayers at a rate 4.6 percentage points higher than the previous maximum. In addition, provisions from the Affordable Care Act that imposed new taxes on net investment income and wages also helped boost total taxes paid among the wealthy. Although some acceleration of income into 2012 might have skewed the numbers, higher rates on the wealthy have persisted and should continue to stay above their pre-2013 levels in future years.
Taxes are complicated, and you have to stay aware of the impact of changing tax laws on your personal finances. 2015 was a relatively quiet year on the tax front, but some of the moves discussed above could end up saving you money come tax season.
The article The 3 Biggest Tax Headlines in 2015 originally appeared on Fool.com.
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