2016 Tax Provisions

For tax year 2016, the IRS provided annual inflation adjustments in Revenue Procedure 2015-53. Those items of greater interests to taxpayers include the following dollar amounts:

  • For 2016, the top tax rate for taxpayers whose income exceeds $415,050 ($466,950 for taxpayers filing married filing joint, MFJ) is 39.6 percent. Other marginal tax rates such as the 10,15, 25, 28, 33 and 35 percent are explained in Rev. Proc. 2015-53.
  • The standard deduction for heads of households rises to $9,300 for tax year 2016, up from $9,250 for tax year 2015. The other standard deduction amounts for 2016 remain the same as they were for 2015; $6,300 for single and married filing separate filers, MFS, and $12,600 for married filing joint, MFJ.
  • If you itemize your deductions, your deductions are based on the amount of income. If you had income of $259,400 or more ($311,300 for MFJ) you may not be able to claim the full amount of itemized deductions.
  • Personal exemptions increased $50 from $4,000 in 2015 to $4,050 in 2016. However, the exemption begins to phase out when adjusted gross income, AGI, exceeds $259,400 ($311, 300 for MFJ). It is completely phased out when your AGI exceeds $381,900 ($433,800 for MFJ).
  • The Alternative Minimum Tax, AMT, another tax targeted to higher income individuals, provides an exemption from its tax. The exemption amount is $53,900 for 2016, and begins to phase out at $119,700 ($83,800 exemption for MFJ, which begins to phase out at $159,700). For 2015, the exemption amount was $53,600 ($83,400 for MFJ). For 2016, the 28 percent tax rate will apply to taxpayers with income above $186,300 ($93,150 for MFS taxpayers)
  • For 2016, the maximum Earned Income Credit amount is $6,269, for MFJ taxpayers with 3 or more qualifying children, up from $6,242 for 2015. Check out Revenue Procedure 2015-53 for other filing statuses, their threshold and phase-out amounts.
  • For 2016, the monthly limitation for qualified transportation fringe benefit remain at $130 for transportation, but rises to $255 for qualified parking, which is up from $250 for tax year 2015.
  • For 2016, Medical Savings Account, MSA, participants with self-only coverage the plan must have an annual deductible of $2,250, up from $2,200 for 2015, but not more than $3,350, up from $3,300 for 2015. Self-only coverage out of pocket maximum expense should not exceed $4,450. For 2016 family coverage, the annual deductible base remains at $4,450, as in 2015, however, the deductible cannot exceed $6,700,  up $50 from the 2015 limit. For family coverage, the out of pocket limit remains at $8,150, the same as it was for 2015.
  • For 2016, the AGI for MFJ filers used to determine the reduction in the Lifetime Learning Credit is $111,100, up from $110,000 to claim the credit.
  • The Foreign Earned Income Exclusion is $101,300 for 2016, up from $100,800 for 2015.
  • Estates for decedents dying during 2016 will see a basic exclusion amount of $5,450,000, up from $5,430,000 for decedents dying during 2015.