IRS Issues Inflation-Adjusted Tax Amounts for 2016 Tax Year

[Elrod]

FROM:........http://www.accountingweb.com/tax/individuals/irs-issues-inflation-adjusted-tax-amounts-for-2016-tax-year

 

 

The standard deduction for heads of household and the personal exemption are among some of the tax provisions with amounts that will increase slightly for tax year 2016, according to the annual inflation adjustments issued by the IRS on Oct. 21.

 

Revenue Procedure 2015-53 .......https://www.irs.gov/pub/irs-drop/rp-15-53.pdf  provides details about the inflation adjustment amounts for more than 50 tax provisions, as well as the tax rate schedules and other tax changes for 2016.

Here are some of the key tax benefit amounts and tax rate bracket information for the 2016 tax year:

• The 39.6 percent tax rate affects single taxpayers whose income exceeds $415,050 ($466,950 for married taxpayers filing jointly), up from $413,200 and $464,850, respectively. The other marginal tax rates – 10, 15, 25, 28, 33, and 35 percent – and the related income tax thresholds for 2016 are described in the revenue procedure.
• The standard deduction for heads of household rises to $9,300 for 2016, up from $9,250 for 2015. The other standard deduction amounts for 2016 remain as they were for 2015:   $6,300 for singles and married persons filing separate returns, and $12,600 for married couples filing jointly.
• The limitation for itemized deductions to be claimed on tax year 2016 individual income tax returns begins with incomes of $259,400 or more ($311,300 for married couples filing jointly).
• The personal exemption for 2016 rises $50 to $4,050, up from the 2015 exemption of $4,000. However, the exemption 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 2016 is $53,900 and begins to phase out at $119,700 ($83,800 for married couples filing jointly, for whom the exemption begins to phase out at $159,700). The 2015 exemption amount was $53,600 ($83,400 for married couples filing jointly). For 2016, the 28 percent tax rate applies to taxpayers with taxable incomes above $186,300 ($93,150 for married individuals filing separately).
• The 2016 maximum Earned Income Tax Credit amount is $6,269 for taxpayers filing jointly who have three or more qualifying children, up from a total of $6,242 for 2015. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds, and phase-outs.
• The monthly limitation for the qualified transportation fringe benefit remains at $130 for transportation, but rises to $255 for qualified parking, up from $250 for 2015.
• For participants who have self-only coverage in a medical savings account, the plan must have an annual deductible that is not less than $2,250, up from $2,200 for 2015, but not more than $3,350, up from $3,300 for 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 – $4,450; however, the deductible cannot be more than $6,700, up $50 from the limit for 2015. For family coverage, the out-of-pocket expense limit remains at $8,150 for 2016, as it was for 2015.
• 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 2015.
• The foreign earned income exclusion is $101,300, up from $100,800 for 2015.
• Estates of decedents who die during 2016 have a basic exclusion amount of $5.45 million, up from a total of $5.43 million for estates of decedents who died in 2015. The annual gift tax exclusion remains at $14,000.