Tax Changes For The 2016 Tax Year!

  1. The health insurance penalty is ramping up significantly for taxpayers without health insurance for 2016.   Taxpayers without health insurance must pay either $695 per adult and $347.50 per child or 2.5 percent of their household income over the tax return filing threshold, whichever is greater.
  2. Inflation has been mild and has not affected taxes very much in 2016. The standard deduction for 2016 is still $6,300 for single taxpayers and married persons filing separate returns and $12,600 for joint filers. The standard deduction for heads of household went up $50 in 2016 to $9,300.
  3. Personal exemptions also went up $50 in 2016 to $4,050 per dependent in 2015.  However, personal exemptions phase out for adjusted gross incomes over $285,350 ($311,300 for married couples filing jointly).
  4. Higher income levels also affect itemized deductions for 2016. Itemized deductions are reduced if incomes exceed $285,350 for single taxpayers and $309,900 for married couples filing jointly.
  5. Since gas prices are lower in 2016, the business standard mileage allowance 54 cents per mile. The rate for medical or moving expenses is down to 19 cents per mile for 2016. For miles driven in service of charitable organizations, it’s still 14 cents per mile.
  6. The estate tax laws continue to change. An estate can be worth $5,450,000 before it is subject to federal estate tax.
  7. Employer-sponsored healthcare Flexible Spending Arrangements (FSA) changed in 2016. The annual dollar limit on employee contributions to an FSA rose to $2,550 for a single taxpayer and $5,100 for married taxpayers.
  8. Regarding gifts, the amount you can give as a gift to any one person in 2016 without filing a gift tax return is still $14,000 per year.
  9. The amount you can contribute to an IRA in 2016 remains at no more than $5,500 in a traditional or Roth IRA. If you’re age 50 or older, you can contribute $6,500.  There are some income limitations for IRAs so check the IRS website or contact us for more information.
  10. The income limit for Social Security for 2016 is the same as last year at $118,500 and the Social Security tax rate is still 6.2%.  The Medicare rate is still 1.45% until wages exceed $200,000 for single taxpayers and $250,000 or married couples and then the Medicare rate goes up an additional .9%