2015 Pension Contribution Limits

As the end of the year rolls around, if you have not already done so, now is the time to plan for contributions into your retirement accounts in 2015. While Traditional IRA and Roth IRA plan limits are unchanged versus 2014, please note the contribution increases in 401(k), 403(b), 457 and SIMPLE IRAs.

Retirement Program 2015 2014 Change Age 50 or over catch up
IRA: Traditional $5,500 $5,500 none add: $1,000
IRA: Roth $5,500 $5,500 none add: $1,000
IRA: SIMPLE $12,500 $12,000 +$500 add: $3,000 (up $500)
401(k), 403(b), 457 plans $18,000 $17,500 +$500 add: $6,000 (up $500)

Don’t forget to take advantage of any matching programs offered by your employer as you review your various funding levels.

2014 Planning Note: Remember you have until April 15th, 2015 to make contributions to your Roth or Traditional IRA for the 2014 tax year.

Don’t Make this Mistake

Caution with car donations

Car donationsAs the end of the year approaches many taxpayers are looking to reduce their tax bite by making charitable contributions. One of the biggest contributions a taxpayer can make is to donate a used automobile. But if not careful, the value of a donated vehicle could be a lot lower than you think.

The rule

When you donate a vehicle, the value of your donation is either the fair market value of your vehicle when you donate it OR the value received by the charitable organization for your donation. Unfortunately, you do not get to choose the value of the donated vehicle. It all depends:

  • If the organization either uses the vehicle or is in the business of using your vehicle to train others you can deduct the fair market value of the vehicle.
  • If the charitable group simply resells your donated vehicle, your donation is limited to what the organization receives for your vehicle and NOT the usually much higher fair market value of the item.

What you should do

Budget icon Select the organization wisely. Make sure you select an organization that will either use the vehicle themselves or will use it to train others. Qualified organizations include groups that help single mothers obtain transportation to and from work or use the vehicles to deliver meals to seniors. Other organizations teach auto repair and body shop work to the unemployed. The cars then are given to other non-profits or needy folks. From the IRS perspective, a qualifying charitable use either;

  • makes significant intervening use of the vehicle or,
  • makes significant improvement to the vehicle that increases its value or,
  • donates the vehicle (or sells it at a below market rate) to a needy person that helps further the cause of the organization.
Budget icon Research the fair market value. Prior to donating your vehicle go to a reputable source and estimate the value of your vehicle. Online resources like Edmunds.com and kbb.com (Kelley Blue Book) are two reliable sites to do this.
Budget icon Obtain the proper tax form. When donating your vehicle make sure the organization gives you a proper Form 1098-C at the time you provide your vehicle. Double check the value assigned to your donation form to ensure it meets or exceeds the estimated fair market value of your donation.
Budget icon Sell the vehicle and donate the cash. If you cannot find a charitable organization that will allow you to maximize your fair market value deduction, consider selling the vehicle and then donating the proceeds. There are problems with this approach, however. First, take care that you do not create an unplanned taxable capital gain with the transaction. Second, take into account any sales taxes that go with the transaction as this may conceivably reduce the amount you receive for your vehicle.