WASHINGTON — Regarding the tax year of 2016, the Internal Revenue Service announced annual inflation adjustments for more than 50 tax provisions; including the tax rate schedules, and other tax changes as well. The Revenue Procedure 2015-53 provides details about these annual adjustments.
The tax items that should be of greatest interest to most taxpayers for the 2016 year include the following dollar amounts:
For the tax year of 2016, the 39.6 percent tax rate affects single taxpayers whose income exceeds $415,050 and $466,950 for married taxpayers filing jointly. This is up from $413,200 and $464,850 respectively from the previous year. The other marginal rates– 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds for the tax year of 2016 are described in the revenue procedure shown below.
The standard deduction for heads of household rises to $9,300 for the tax year of 2016, up from $9,250 in 2015. The other standard deduction amounts for 2016 remain the same as they were in 2015: $6,300 for singles and married persons filing separate returns and $12,600 for married couples that file joint taxes.
The limitation for itemized deductions to be claimed on the tax year of 2016 returns of individuals begins with an income of $259,400 or higher, and an income of $311,300 or higher for married couples filing jointly.
The personal exemption for the tax year of 2016 is $4,050 which is up fifty dollars from the 2015 exemption of $4,000. However, this is subject to a phase-out that begins with adjusted gross incomes of $259,400 ($311,300 for married couples filing jointly). It phases out completely at $381,900 ($433,800 for married couples filing jointly).
The Alternative Minimum Tax exemption amount for the tax year of 2016 is $53,900 and begins to phase out at $119,700. The Alternative Minimum Tax exemption amount for married couples filing jointly is $83,800 and begins to phase out at $159,700. The 2015 exemption amount was $53,600 and was $83,400 for married couples filing jointly. For the tax year of 2016, the 28 percent tax rate applies to taxpayers with taxable incomes above $186,300 ($93,150 for married individuals filing separately).
The tax year of 2016 Maximum Earned Income Credit amount is $6,269 for taxpayers filing jointly who have three or more qualifying children. That is up twenty seven dollars from the 2015 tax year which was $6,242. The revenue procedure includes a table providing maximum credit amounts for other categories which income thresholds and phase-out amounts.
For the tax year of 2016, the monthly limitation for the qualified transportation fringe benefit remains at $130 for transportation, but rises to $255 for qualified parking which is $5 more than the previous year.
For the tax year of 2016 participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is no less than $2,250, up from $2,200 for the tax year of 2015; but not more than $3,350, up from $3,300 for the tax year of 2015. For self-only coverage the maximum out of pocket expense amount remains at $4,450. For participants with family coverage, the floor for the annual deductible remains as it was in 2015 which is $4,450, however the deductible cannot be more than $6,700, up $50 from the limit for the 2015 year. For family coverage, the out of pocket expense limit remains at $8,150 for the tax year of 2016, as it was for the tax year of 2015.
For the tax year of 2016, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $111,000, up from $110,000 for the tax year of 2015.
For the 2016 tax year, the foreign earned income exclusion is $101,300, up from $100,800 the previous year.
Estates of decedents who happen to die during the 2016 year have a basic exclusion amount of $5,450,000. That amount is up twenty thousand dollars from the previous tax year of 2015.
For any and all tax questions, please contact The Tax Defense Group!
Reference : https://www.irs.gov/uac/newsroom/in-2016-some-tax-benefits-increase-slightly-due-to-inflation-adjustments-others-are-unchanged