It’s 2015, and while you may be ready to look back on your financial year, especially as you prepare your taxes, why not look ahead to days you can actually do something about?
The good news: these changes could put more money in your pocket in 2015. Between changes to tax law, retirement savings plans, and student loan repayment options, these new rules affect millions of Americans.
Here are seven financial changes for 2015 that could help you save more money.
1. Higher 401(k) contribution limits are on the way
If you regularly max out your 401(k) contributions, you’re in luck. These limits are increasing across the board, so you can enjoy even greater tax savings in the coming year.
The 401(k) contribution for everyone is increasing by $500 to a total of $18,000 for 2015.
The catch-up contribution for those age 50 and older has been upped to $6,000—$500 more than for 2014.
Setting aside extra money in a 401(k) can translate into income tax savings; 401(k) plans reduce your taxable income. Your tax savings depend on your income tax bracket. But if you deposit an extra $500 into a 401(k) plan in 2015, your tax liability can be reduced by $75 to $175.
2. The MyRA is born
The US Treasury is launching a new type of retirement account called the myRA. This account is geared towards low-to-middle-income earners who might otherwise be unlikely to have retirement savings.
The myRA is actually a Roth IRA with one key feature: The investment is guaranteed by the Treasury to never lose value.
Contributing to a myRA is designed to be simple. The Treasury says an account can be opened free of charge and in about 10 minutes. From there, withdrawals are a direct deposit straight from your paycheck. Account holders can contribute as much or as little as they choose. Annual contributions are capped at the same levels as traditional and Roth IRAs, which are currently $5,500. MyRA accounts follow the same withdrawal and distribution rules as Roth IRAs.
The new myRA accounts can be used for up to 30 years or until the balance hits $15,000. Account holders will then be required to move their money into a different retirement account.
3. “Pay As You Earn” student loan repayment available to more people
The core parts of the PAYE program won’t change. PAYE is a repayment option for federal student loans that caps payments at 10% of a borrower’s income. Any remaining debt after 20 years is forgiven.
Currently, only borrowers who took out loans after October 2007 are eligible to use PAYE. With this change, borrowers who took out loans before this date will become eligible, too. Any borrowers who can be included would still have to meet income limitations and other requirements of the PAYE program.
However, if you’re ready to jump on this one, you’ll still have to wait. This extended offer isn’t expected to be launched until December 2015.
4. Higher income cutoffs for IRAs
There are no changes to traditional and Roth IRAs for 2015. But there is some good news: Those with higher incomes are now eligible to contribute.
Increases to the cutoffs by filing type are as follows:
- Single – increases by $1,000 from $60,000 to $61,000
- Head of household – increases by $1,000 from $70,000 to $71,000
- Married filing jointly – phase-out ranges increase by $2,000 on each end
Adjusted gross income (AGI) phase-out ranges will also increase by $2,000 across the board.
5. Saver’s credit will also change in 2015
Income limits for the Saver’s Credit, which gives a tax credit to low-income earners, will be increased in 2015 as well.
The income levels will increase by the following amounts:
- Single and married filing separately – up $500 to $30,500
- Head of household – up $750 to $45,750
- Married filing jointly – up $1,000 to $61,000
If you’re potentially eligible, be sure to check if these changes will affect you.
6. Social Security recipients will get an increase
Social security payments will see a cost-of-living increase of 1.7% in 2015. This means that the average retiree will get about $22 more each month. For couples, it’s an extra $36.
This change is automatic, so you don’t need to do anything except to make sure you’ve received the extra money you’re entitled to.
7. Flexible Spending Accounts can now carry over
Starting this year, more workers will be able to carry over up to $500 in a Flexible Spending Account (FSA) to the next year. This change was actually made late in 2013, but more companies began adopting it in 2014. In other words, the “use it or lose it” provision is no more.
FSAs are still funded with pretax dollars and can be used for co-pays, prescriptions, deductibles, and other specified health care costs. However, you still must choose either an FSA or a Health Savings Account (HSA) but not both.
This change can potentially result in more interest from those who previously didn’t want to risk losing their money if they didn’t use it in time.
This change isn’t universal, however. Your employer needs to adopt the changes first, so be sure to check with your company.
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