United States: Summary of key 2014 and 2015 federal tax rates and limits

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1 www. pwcias.com United States: Summary of key 2014 and 2015 federal tax rates and limits January 2015 In brief The following is a high-level summary of some key individual tax rates and applicable limits for 2014 and For purposes of this news alert, the reference to $ means USD. Further: MFJ means married filing jointly MFS means married filing separately HOH means head of household This compilation is intended to serve as a handy reference guide for companies with globally mobile workforces as they prepare for US individual tax filings relating to 2014, as well as planning for 2015.

2 In detail FICA taxes Social Security (SS) wage base $117,000 $118,500 SS maximum 6.2% $7, $7, Medicare 1.45%* No ceiling No ceiling * See below, under Additional Medicare Tax, for details on an increase in the Medicare Tax that applies to wages and other compensation only in excess of an applicable threshold amount. Additional Medicare Tax A 0.9% tax* is imposed on individual wages and other compensation in excess of the following threshold amounts: Single $200,000 Single $200,000 MFJ $250,000 MFJ $250,000 MFS $125,000 MFS $125,000 HOH $200,000 HOH $200,000 * The tax was imposed under the Patient Protection and Affordable Care Act of Tax on net investment income A 3.8% tax is imposed on the lesser of net investment income or the excess of MAGI* over the following threshold amounts: Single $200,000 Single $200,000 MFJ $250,000 MFJ $250,000 MFS $125,000 MFS $125,000 HOH $200,000 HOH $200,000 * Modified adjusted gross income. The Unearned Income Medicare Contribution, otherwise known as the net investment income tax (NIIT), was imposed under the Patient Protection and Affordable Care Act of Personal exemption (PE) Personal exemption: $3,950 $4,000 PE phase-out The phase-out of personal exemptions begins when adjusted gross income (AGI) reaches: Single $254,200 Single $258,250 MFJ $305,050 MFJ $309,900 MFS $152,525 MFS $154,950 HOH $279,650 HOH $284,050 For 2014, the phase-out of personal exemption ends at $376,700 for single individuals, $427,550 for married persons filing jointly, $402,150 for heads of households, and $213,775 for married individuals filing separate returns. For 2015, the phase-out of personal exemption ends at $380,750 for single individuals, $432,400 for married persons filing jointly, $406,550 for heads of households, and $216,200 for married individuals filing separate returns. Standard deduction Standard deduction: Single $6,200 Single $6,300 MFJ $12,400 MFJ $12,600 MFS $6,200 MFS $6,300 HOH $9,100 HOH $9,250 Itemised deductions The reduction of itemised (not standard) deductions by 3% of AGI in excess of the following amounts*: Single $254,200 Single $258,250 MFJ $305,050 MFJ $309,900 MFS $152,525 MFS $154,950 HOH $279,650 HOH $284,050 * A taxpayer may not lose more than 80% of his or her deductions as a result of the reduction in the itemised deduction amounts. For tax years 2013 and later, new rules may affect medical expense deductions that are itemised on Form 1040, Schedule A. The new rules raise the threshold that unreimbursed medical and dental expenses must reach before a deduction is permitted from 7.5% to 10% of adjusted gross income. A temporary exemption applies for individuals age 65 and older until December 31, Beginning 1 January 2017, the 10% threshold will apply to all taxpayers, including those 65 and over by the end of the taxable year. Standard mileage rates Standard mileage rates: business $0.56 business $0.575 charitable $0.14 charitable $0.14 medical & moving $0.235 medical & moving $0.23 Section 911 Annual exclusion: $99,200 $100,800 Base housing amount: $15,872 $16,128 Standard qualified housing expense limit*: $29,760 $30,240 * Adjustments to the limitation are provided for certain countries with high housing costs adjusted limitations are included in Notice ; 2015 adjusted limitations are yet to be announced.

3 Expatriation to avoid tax 5-year average annual net income tax in excess of the following amount: Amount includible in gross income of covered expatriate is reduced by*: * but not below zero $157,000 $160,000 $680,000 $690,000 Gift tax limits Annual exclusion from total amount of taxable gifts*: Annual exclusion for gifts to non-us citizen spouses*: $14,000 $14,000 $145,000 $147,000 * This amount is per donor and per donee and refers to gifts that are not future interests in property. Qualified dividends Qualified dividend rate: 15%/20%* 15%/20%* Lower income taxpayers: 0% 0% Nonqualified dividends: Ordinary rates Ordinary rates * The 20% dividend rate applies only if a taxpayer s income tax rate falls in the 39.6% bracket. All other taxpayers continue to be subject to a maximum 15% dividend rate. A 0% dividend rate applies to taxpayers who are subject to income tax rates of 15% or less. Child tax credit Child tax credit: $1,000 $1,000 The child tax credit is subject to phase-out for individuals with income over certain threshold amounts. Alternative minimum tax Alternative minimum tax exemption amounts (subject to phase-out described in the table below): Single $52,800 Single $53,600 MFJ $82,100 MFJ $83,400 MFS $41,050 MFS $41,700 HOH $52,800 HOH $53,600 Supplemental withholding flat rates Supplemental wages up to $1,000,000 (optional): Supplemental wages greater than $1,000,000 (mandatory): 25% 25% 39.6% 39.6% Alternative minimum tax phase-out The phase-out of the AMT exemption amount begins when the alternative minimum taxable income exceeds the following amounts: Single $117,300 Single $119,200 MFJ $156,500 MFJ $158,900 MFS $78,250 MFS $79,450 HOH $117,300 HOH $119,200 Capital gains tax Long term: 15%/20%* 15%/20%* Lower income taxpayers: 0% 0% Short term: Ordinary rates Ordinary rates * The 20% capital gains rate applies only if a taxpayer s income tax rate falls in the 39.6% bracket. All other taxpayers continue to be subject to a maximum 15% capital gains rate. A 0% capital gains rate applies to taxpayers who are subject to income tax rates of 15% or less.

4 Federal income tax rates* Married filing jointly & surviving spouses , % 18,150 73,800 1, % 73, ,850 10, % 148, ,850 28, % 226, ,100 50, % 405, , , % 457, , % Married filing jointly & surviving spouses , % 18,450 74,900 1, % 74, ,200 10, % 151, ,450 29, % 230, ,500 51, % 411, , , % 464, , % Single , % 9,075 36, % 36,900 89,350 5, % 89, ,350 18, % 186, ,100 45, % 405, , , % 406, , % Single , % 9,225 37, % 37,450 90,750 5, % 90, ,300 18, % 189, ,500 46, % 411, , , % 413, , % Married filing separately , % 9,075 36, % 36,900 74,425 5, % 74, ,425 14, % 113, ,550 25, % 202, ,800 54, % 228,000 63, % Married filing separately , % 9,225 37, % 37,450 75,600 5, % 75, ,225 14, % 115, ,750 25, % 205, ,425 55, % 232,425 64, % Head of household , % 12,950 49,400 1, % 49, ,550 6, % 127, ,600 26, % 206, ,100 48, % 405, , , % 432, , % * 2015 rate tables are provided in Rev. Proc Head of household , % 13,150 50,200 1, % 50, ,600 6, % 129, ,850 26, % 209, ,500 49, % 411, , , % 439, , %

5 Special note about legal same-sex marriages Beginning with the 2013 tax year (and earlier years in certain circumstances), same-sex couples legally married in jurisdictions that recognise their marriages are treated as married for federal tax purposes, including income and gift and estate taxes. This status is awarded regardless of whether the couple currently lives in a jurisdiction that recognises same-sex marriage or a jurisdiction that does not. The status does not apply to registered domestic partnerships, civil unions or similar formal relationships recognised under state law. Legally-married same-sex couples typically must file their 2013 or later federal income tax returns (and earlier years in certain circumstances) using either the married filing jointly or married filing separately filing status. Also, individuals who were in same-sex marriages may, but are not required to file original or amended returns choosing to be treated as married for federal tax purposes for prior tax years still open under the statute of limitations. Your International Assignment Services contacts Our International Assignment Services team offers comprehensive solutions that help clients maximise business value from international assignments bringing organisations to the leading edge of business performance. We specialise in international assignments management, expatriate tax compliance and advisory, tax & assignment policy review and design, regional health check, expatriate compensation and benefits design and immigration services. Mandy Kwok Berin Chan Robert Keys Theresa Chan Managing Asia mandy.kwok@hk.pwc.com berin.db.chan@hk.pwc.com robert.b.keys@hk.pwc.com theresa.ky.chan@hk.pwc.com Jane Cheung +86 (21) jane.kc.cheung@cn.pwc.com The information contained in this publication is of a general nature only. It is not meant to be comprehensive and does not constitute legal or tax advice. PwC International Assignment Services Holdings Pte Ltd ( PwC ) has no obligation to update the information as law and practice change. The application and impact of laws can vary widely based on the specific facts involved. No reader should act or refrain from acting on the basis of any material contained in this publication without obtaining advice specific to their circumstances from their usual PwC client service team or their other advisers. The materials contained in this publication were assembled in January 2015 and were based on the law enforceable and information available at that time PwC International Assignment Services Holdings Pte Ltd. All rights reserved. In this document, PwC refers to PwC International Assignment Services Holdings Pte Ltd, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. HK C1