Tax Changes for 2016
Always prepare for filing changes one year ahead – that means getting educated on what’s to come and keeping tabs on documents, so you know how your tax refund may be affected. Each year, lawmakers tweak the terms for filing your taxes, but aren’t applicable until you file the next year. These 8 changes often consist of rises in caps, but also penalties. Read below for the most important ones. Again, the below changes are for the 2016 tax year, so take note for 2017.
Affordable Care Act Penalties
As many Americans know, there are penalties for not having health insurance. The fees have risen this year, from $285 to $695 per adult, and from 2% to 2.5% above the filing limit. There will be a family maximum, but it is substantially higher than previous years at $2,085.
Tax Bracket Rise
The change is small, 0.4%, but can steadily change your taxes. The classes are often adjusted for inflation, and we can expect to see a rise in coming years.
Head of Household Filers Receive a Larger Deduction
Standard deductions increase $50 to $9,300 for those who quality as head of household. Due to the low inflation rate, singles, married filing jointly or separately are the same.
A Rise in Personal Exemptions
Another $50 boost, the amount taxpayers are entitled to for personal exemptions will now reach $4,050.
Earned Income Credit Bump
This boost will benefit those with children the most. For families with 3 or more qualifying kids, the maximum will rise $27 to $6,269. Having two qualifying children raises the maximum to $5,572, and one-child parents are entitled to a maximum $3,373 income credit. Childless individuals can claim up to $506, only a $3 increase.
A Higher Alternative Minimum Tax
An increase that will affect many, the AMT has changed. Single taxpayers can claim exemptions as high as $53,900, and joint filers can boost to $83,800.
Estate Tax Exemption Increase
There is a lifetime exemption for the gift and estate tax, also tied to inflation, and has been on the rise. $5.45 million is the new exemption amount, up $20,000 from 2015. The limit applies to estates of those who pass away in 2016.
Unchanging Tax Laws
The small amount of inflation in our economy has had a great effect, changing some tax laws, and further rooting others. Contribution limits to 401(k) plans, IRAs, and flexible spending arrangements are all staying the same in 2016 as they were in 2015.
Now that you’re updated, file this away with your business expense receipts for 2016. In the meantime, get started on reporting and filing for 2015. You’ve got T minus 6 weeks!