2016 is right around the corner and brings tax changes for you to know. Understanding the tax changes will enable you to properly plan and help you to maximize your tax savings.
- Tax Filing Day is April 18, 2016. If you are a resident of a New England state that celebrates Patriots Day, your tax filing deadline is April 19, 2016.
- Tax Penalties for Obamacare increase. The ACA penalty for not having qualified healthcare coverage rises to $285 per adult, or 2% of income above the filing limit in 2015. For 2016, penalties will rise again, hitting $695 per adult, or 2.5% of income.
- Tax Brackets Increase. Tax brackets are adjusted for inflation at about 0.4%.
- Standard Deduction for Head of Household Filers Rise. For those who qualify as heads of household, the standard deduction will rise $50 to $9,300 in 2016.
- Personal Exemptions Rise. The personal exemption for 2016 will be $4,050, which is an increase of $50.
- Health Savings Account Contribution Limits Increase. For 2016, the contribution limit for individual policies will remain at $3,350, but the maximum contribution for family policies will rise by $100 to $6,750. A catch-up contribution of $1,000 for those 55 or older will continue to apply.
- Earned Income Credit Rises. For those with three or more qualifying children, the maximum credit will rise to $6,269, up $27. Those with two children will get a maximum $5,572, which is up $24 from 2015, while one-child families can get up to $3,373, $14 more than last year. Those without children get just a $3 bump and can claim up to $506 for 2016.
- AMT Exemption is Higher. Single taxpayers will see their AMT exemptions go up $300 in 2016 to $53,900, while joint filers will see a $500 boost to $83,800.
- Estate Tax Exemption Increases. The exemption amount will rise to $5.45 million, up $20,000 from 2015. The limit applies to estates of those who pass away in 2016.
- Other Tax Provisions Pending Renewal. Again, lawmakers wait until the last minute to renew popular tax breaks, such as charitable distribution from IRAs, state sales tax deductions, teachers’ write-offs for classroom supplies, and deductions for private mortgage insurance. As of early December, these provisions hadn’t yet been renewed for 2015, but typically, lawmakers renew them retroactive to the beginning of the year. The same is likely in 2016 unless an extension provides for two years of relief rather than just one.
Read more at 10 Biggest Income Tax Changes to Plan for in 2016 by USA Today