The tax filing season will begin soon, and 2016 brings with it the usual litany of changes in the tax rules. However, there are not as many changes this year as there have been in past years; there were few real changes in policy for tax year 2015; most of the changes are simply due to the standard inflationary increases that come each year for the various types of deductions, credits and exemptions that are in the tax code. If you’re looking to get a head start on doing your taxes for 2015, here’s a list of some of the key numbers that you’ll need to know in order to prepare your return.
- The filing deadline in 2016 will fall on April 18 – A holiday in Washington, D.C, will cause the standard filing deadline that would normally come on Friday, April 15 to be postponed until the following Monday. This is just about the only real change from previous years that is not related to inflationary increases.
- The penalties under Obamacare for not having health insurance will rise to a maximum of $695 for individuals or $2,085 for families or 2.5% of income for either, whichever is greater.
- The Itemized Deduction phaseout begins at $259,400 for single, $285,350 for Head of Household, $155,650 for Married Filing Separately filers and $311,300 for married couples filing jointly. The upper end limits are $381,900 for single filers and $433,800 for marrieds filing jointly respectively. Those with incomes above the upper end limits cannot claim itemized deductions.
- The Standard Deduction for Head of Household filers will rise to $9,300. The Standard Deductions for all other filing statuses will remain unchanged.
- The dollar amount for personal and dependent tax exemptions rises by $50 to $4,050 per person. This means that a family of six will be able to deduct a total of $24,600 in personal and dependent exemptions.
- The Earned Income Credit has been raised across the board. Married taxpayers filing jointly who have at least three qualifying dependents are eligible to claim up to $6,269. The limits for all of the other filing classes and numbers of dependents have also been adjusted accordingly.
- The monthly fringe benefit for qualified transportation will remain at $130 for transportation, but the benefit for qualified parking will rise by $5 to $255 for 2016.
- The estate tax exclusion for deceased taxpayers will rise by $20,000 to $5,450,000 from $5,430,000 in 2016.
- The dollar range for deductibles for Medical Savings Accounts for single participants has risen to $2,250 for the minimum and $3,350 for the maximum in 2016. Participants with family coverage will see their maximum deductible rise by $50 to $6,700 for the year. The maximum out-of-pocket expense amounts remain unchanged for participants in both categories.
- The amount of Adjusted Gross Income that will be used to determine the reduction in the Lifetime Learning Credit has rising by $1,000 to $111,000 in 2016.
- The Foreign Earned Income Exclusion has risen by $500 to $101,300.
- The exemption amount for the Alternative Minimum Tax is $83,800 for married taxpayers filing jointly and begins to phase out at $159,700. For married taxpayers filing separately the amounts are $41,900 and $79,850. For all other filing statuses, these amounts are $53,900 and 119,700 in 2016.
- The adoption credit for a child with special needs is now $13,640. The phase-out range for the credit starts at $201,920 and tops out at $241,920. Those with AGIs above the latter amount cannot claim the credit.
- The maximum amount of refundable Child Tax Credit has risen to $3,000.
- The maximum amount of Hope Credit is equal to 100% of all qualified expenses up to $2,000 and 25% of all expenses above this amount up to $4,000. The income phaseout for this credit begins at $160,000 for married taxpayers filing jointly and half that amount for all other filing statuses. The respective amounts for the phaseout of the Lifetime Learning Credit are $111,000 for joint filers and $55,000 for all others.
- The Gift Tax Exclusion is $14,000 for 2016. This means that you can give cash or property worth up to that amount to another individual during the year without having to file a Form 706 or reduce their estate tax exclusions.
The Bottom Line
The 2016 tax year will not bring as many changes as several of the previous tax years have seen. Filers will have a few extra days to get their returns to the IRS in 2016 without incurring interest or penalties, but the other changes essentially represent a small percentage increase. The good news is that these increases may lead to tax savings for some filers, because there was no real inflation in 2015 according to the Consumer Price Index. For more information on the numerical tax changes that apply in 2016, consult IRS Revenue Procedure 2015-53 at or consult your tax or financial advisor. (For more, see: Does Everyone Have to File a Federal Tax Return?)