Thursday, December 3, 2015

2016 Federal Income Tax Rates and Other Interesting Stuff

Most of the inflation adjusted amounts are indexed based on inflation factors as of August 31st each year.  Various tax reference sources, such as CCH and RIA, make projections based on these factors.

We have chosen to wait until the official numbers have been released.  Here are the official 2016 amounts.

Revenue Procedure 2015-53 contains most of these inflation adjusted amounts for 2016.  A copy of the Rev. Proc. can be found at www.irs.gov/pub/ by clicking on irs‑drop and clicking on rp-15-53.

- Tax Rates - Ceilings

Single
10% bracket tops at $9,275
15% tops at $37,650
25% tops at $91,150
28% tops at $190,150
33% tops at $413,350
35% tops at $415,050
39.6% applies to anything over $415,050

MFJ
10% bracket tops at $18,550
15% tops at $75,300
25% tops at $151,900
28% tops at $231,450
33% tops at $413,350
35% tops at $466,950
39.6% applies to anything over $466,950

Head of Household
10% bracket tops at $13,250
15% tops at $50,400
25% tops at $130,150
28% tops at $210,800
33% tops at $413,350
35% tops at $441,000
39.6% applies to anything over $441,000

MFS
10% bracket tops at $9,275
15% tops at $37,650
25% tops at $75,950
28% tops at $115,725
33% tops at $206,675
35% tops at $233,475
39.6% applies to anything over $233,475

Estates & Trusts
15% bracket tops at $2,550
25% tops at $5,950
28% at $9,050
33% at $12,400
39.6% applies to anything over $12,400

- Exemption amount is $4,050.

- Standard deduction amounts are:  MFJ-$12,600, Single & MFS-$6,300, HH-$9,300, Additional amounts for aged/blind-$1,550 for unmarried and $1,250 for married status.

- Exemption and itemized deduction phase outs begin for MFJ at $311,300, HH at $285,350, S/HH at $259,400, and MFS at $155,650.

- Kiddie Tax
Standard Deduction is $1,050, the next $1,050 is taxed at child’s rate, and the excess is taxed at parent’s rate.  AMT Exemption amount is the child’s earned income plus $7,400.

- AMT – The exemption amounts are:
MFJ/QW = $83,800
S/HH = $53,900
MFS = $41,900
Estates/trusts = $23,900

The excess taxable income level (where the 28% AMT rate applies) is:
MFJ/QW/S/HH = $186,300
MFS = $93,150

- Adoption Credit - $13,460 is the maximum for the credit or assistance amounts.  The phase out starts at $201,920 and is completely phased out at $241,920.

- Child Tax Credit – refundable portion uses an income base of $3,000.

- Education Credits.  The phaseout for the American Opportunity Credit starts at $80,000 ($160,000 for MFJ).  The phaseout for the Lifetime Learning Credit $55,000 ($111,000 for MFJ)

- EIC maximum AGI/earned income for MFJ is $44,846 for one child, $50,198 for two children, $53,505 for three or more children, and $20,430 for no children.  The EIC maximum AGI/earned income for other taxpayers is $39,296 for one child, $44,648 for two children, $47,955 for three or more children, and $14,880 for no children.  Excessive investment income level for EIC is $3,400.

- Transportation Fringe maximum exclusion for monthly parking is $255/month and for commuter highway vehicle and transit passes is $130.

- Savings Bonds for Education phase out level starts at $116,300 for MFJ and $77,550 for other filing statuses.  This is completely phased out at $146,300 for MFJ and $92,550 for other filing statuses.

- §179 election maximum is $25,000.

- Foreign Earned Income exclusion is $101,300.

- Long-term care premiums are limited to:
Age
40 or less-------$390
>40, but not >50------$730
>50, but not >60------$1,460
>60, but not >70------$3,900
>70------$4,870

- Long-term care contract benefit amount is $340 per day.

- Student loan interest maximum is $2,500, with a phase out starting at $65,000 ($130,000 for MFJ).  This is completely phased out at $80,000 ($160,000 for MFJ)

- Annual gift tax exclusion is $14,000, while the limit on gifts to noncitizen spouses is at $148,000.

- Attorney Fee Awards are limited to $200 per hour.

- MSA
Self-only coverage annual deductible is not less than $2,250 nor more than $3,350, with out-of-pocket limits not in excess of $4,450.

Family coverage annual deductible is not less than $4,450 nor more than $6,700, with out-of-pocket limits not in excess of $8,150.

- Cafeteria Plan – The dollar limitation for §125 health FSAs remains at $2,550.

- Nanny Tax – The wage threshold for the Nanny tax for 2016 is $2,000.

- Small Business Health Insurance Credit – The dollar amount for purposes of limiting this credit is $25,900.

- Exclusion amount for Estate/Gift tax is $5,450,000.

Many penalties are now indexed every five years.  2016 is the year of the first indexed amounts.  Three common penalties are:
- Penalty for failure to file a Partnership or S corporation return remains $195 per month per Schedule K-1.

- Penalty for failure to file correct Forms 1099 is $260.

- Penalty for failing to exercise due diligence in connection with EIC claims is $510.


This text has been shared with you courtesy of: David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (fax 920-496-9111).

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