Tax Law Changes For 2016

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Changes in Standard Deductions: The Federal government has increased the standard deductions for inflation.

MFJ or QW

$     12,600

Single

6,300

HOH

9,300

MFS

6,300

Additional for age 65 or older or blind each (MFJ, QW, MFS)

1,250

Additional for age 65 or older or blind each (Single, HOH)

1,550

Personal Exemption   -                                                                                                   $4,050

Standard Mileage Rate  -                         .540 cents               .19 for medical miles                           

Earned Income Credit: These figures too have been raised due to inflation.  There is an increase in income threshold as well as an increase in the maximum credit.

Number Of Children

AGI Must Be Less Than

Max EIC

No qualifying children

$     20,430

$506

One qualifying child

44,846

$3,373

Two qualifying children

50,198

$5,572

Three or more qualifying children

53,505

$6,269

 

Health Insurance Penalties Began in 2014: If you do not have health insurance, here is a breakdown of your penalty.

The penalty is the greater of....

Tax Year

Minimum Per Person in household

% of Household Income (includes dependents)

Max Penalty per family

(If You Are Able To Use Household Column ONLY)

2014

$95

1% up to US Avg Bronze Plan

$285

2015

$325

2% up to US Avg Bronze Plan

$975

2016

$695

2.5% up to US Avg Bronze Plan

$2085

 

To find out the cost of insurance, or for more information about the affordable care act, CLICK HERE or contact one of our offices and ask an expert.

Additional Medicare Tax on Earnings- There is an additional Medicare tax of 0.9% of wages over $200,000 ($250,000 if Married Filing Joint; $125,000 if Married Filing Separate). Self-employment earnings are also subject to the additional Medicare tax when earnings if your net profit exceeds these income amounts.  The additional Medicare tax is not deductible for income or SE tax.

Long-Term Capital Gains and Qualified Dividends Rate: There is now a20% tax rate for long-term capital gains and qualified dividends if your income exceeds exceed $400,000 (Single), $425,000 (Head Of Household), $450,000 (Married Filing Joint) and $225,000 (Married Filing Separately).

Net Investment Income Tax: Individuals with income over $200,000 ($250,000 if Married Filing Joint; $125,000 if Married Filing Separate) are subject to a 3.8% additional tax on their tax return.  This includes includes interest, dividends, royalties, rents, passive income from trade or business and net gains from the sale of property.

Flex Spending Accounts now limited: The maximum you can contribute is limited to $3,300 and $6,650 for family coverage.

Itemized Deduction Phase-Out: Taxpayers are limited on certain itemized deductions applies if their income is higher than $254,200 (Single), $279,650 (Head Of Household), $305,050 (Married Filing Joint) and $152,525 (Married Filing Separately).

Medical Expense Deduction—Increased Threshold: Medical expenses are deductible as an itemized deduction only to the extent they exceed 10% of AGI unless you turned 65 before the end of 2015.

Personal Exemption Deduction Phase-Out: The deduction for personal exemptions is reduced for taxpayers with income higher than $254,200 (Single), $279,650 (Head Of Household), $305,050 (Married Filing Joint) and $152,525 (Married Filing Separately)