For tax year 2016, the IRS recently announced many annual inflation adjustments. IRS Revenue Procedure 2015-53 provides details about these amounts.
Because inflation is low, many of the amounts for 2016 will not change from 2015. For example, the elective deferrals to 401(k) and 403(b) plans will remain $18,000 next year. Other retirement plan contribution limits also will not change.
Recently, the Social Security Administration announced that the Social Security wage base (the amount of earnings subject to taxation) will remain at $118,500 for 2016, the same as 2015.
Here are some of the other tax amounts for 2016, as compared with 2015
|Highest tax rate of 39.6 percent||Will affect singles with income exceeding $415,050 ($466,950 for married taxpayers filing jointly)||Affects singles with income exceeding $413,200 ($464,850 for married couples filing jointly)|
|Standard deduction||Remains $6,300 for singles and married persons filing separately; $12,600 for married couples filing jointly. For heads of household, the amount rises to $9,300||$6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly. The standard deduction for heads of household is $9,250|
|Limitation for itemized deductions||For singles, will begin at incomes of $259,400 ($311,300 for married couples filing jointly)||For singles, begins at incomes of $258,250 ($309,900 for married couples filing jointly)|
|Alternative minimum tax exemption||$53,900 ($83,800, for married couples filing jointly)||$53,600 ($83,400, for married couples filing jointly)|
|Estates||Decedents who die during 2016 will have a basic exclusion amount of $5,450,000||Decedents who die during 2015 have a basic exclusion amount of $5,430,000|
|Annual exclusion for gifts||$14,000||$14,000|
|Foreign earned income exclusion||$101,300||$100,800|
|Gifts to non-U.S. citizen spouse||The exclusion from tax on a gift to a spouse who is not a U.S. citizen will be $148,000||The exclusion from tax on a gift to a spouse who is not a U.S. citizen is $147,000|
|Kiddie Tax||Amount used to reduce the net unearned income reported on a child’s return that is subject to the Kiddie Tax remains $1,050||Amount used to reduce the net unearned income reported on a child’s return that is subject to the Kiddie Tax is $1,050|
|Flexible spending arrangements (FSAs)||The annual limit on employee contributions to employer-sponsored health FSAs will remain $2,550.||The annual dollar limit on employee contributions to employer-sponsored healthcare FSAs is $2,550.|
If you are seeking guidance of CPAs who understand the implications these changes can have on your tax obligations, call 214-696-1922 and ask for Mark Patten.