You won’t have to do your taxes for year 2016 until next calendar year (2017), but the IRS has already released income tax changes that you can use to plan ahead.
As you will notice, the limits for many exemptions and credits will go up – allowing taxpayers to claim higher amounts on their income taxes.
Here, the top 8 income tax changes you should know about:
Personal exemptions are increasing. In 2016, taxpayers will benefit from a $50 increase on the personal exemption, which brings the new amount to $4,050.
Tax brackets are rising. The tax bracket amounts are increasing by roughly 0.4% in 2016, adjusting for inflation.
Standard deductions are increasing. Among the income tax changes for 2016 is a higher standard deduction for head-of-household filers. The new amount is $9,300 – an increase of $50 from the previous year.
Earned Income Credit is getting a slight bump. For those with 3 or more children, the maximum credit is $6,269, up $27. For those with two children, the maximum credit is $5,572, up $24. And with one child, families can get $3,373, up $14 from last year. With no children, taxpayers can get a maximum credit of $506, up just $3.
Alternative Minimum Tax exemption is higher. In 2016, the exemption for AMT will go up $300 for single taxpayers to $53,900. For joint filers, the exemption will increase $500 to $83,800.
Estate Tax exemption is increasing. Another income tax change for next year is the exemption for estate tax, which will increase to $5.45 million – a $20K increase from 2015.
Family health savings plan contributions are going up. The amount taxpayers can set aside on a pretax basis for family policies will rise by $100 to $6,750. No changes to individual policies or catch-up contributions for ages 55 and older.
Obamacare tax penalties will rise sharply. In 2016, there will be a significant income tax change for those without qualifying health care coverage. While the penalties started at $285 per adult in 2015, that amount will spike to $695 per adult in 2016. Family maximum penalties will go from $975 in 2015 to $2,085 in 2016.
If you have concerns about personal or business income taxes for this year or next, you can speak with a tax attorney by getting a referral from the Lawyer Referral and Information Service (LRIS) of San Diego County. Call (619) 231-8585 to speak with a member of our bilingual referral staff.