Annual inflation adjustments for more than 50 tax provisions -- including the tax rate schedules and other tax changes -- are in the works for the 2016 tax year.
According to the Internal Revenue Service, the tax items of greatest interest to most taxpayers include the following dollar amounts:
- For tax year 2016, the 39.6% tax rate affects single taxpayers whose income exceeds $415,050 ($466,950 for married taxpayers filing jointly), versus $413,200 and $464,850, respectively. The other marginal rates -- 10, 15, 25, 28, 33 and 35% -- and the related income tax thresholds for tax year 2016 are described in Revenue Procedure 2015-53.
- The standard deduction for heads of household rises to $9,300 for tax year 2016, up $50, from tax year 2015.The other standard deduction amounts for 2016 remain as they were for 2015: $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly
- The limitation for itemized deductions to be claimed on tax year 2016 returns of individuals begins with incomes of $259,400 or more ($311,300 for married couples filing jointly).
- The personal exemption for tax year 2016 rises $50 from 2015 -- to $4,050. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $259,400 ($311,300 for married couples filing jointly). It phases out completely at $381,900 ($433,800 for married couples filing jointly.)
- The Alternative Minimum Tax exemption amount for tax year 2016 is $53,900 and begins to phase out at $119,700 ($83,800, for married couples filing jointly for whom the exemption begins to phase out at $159,700). The 2015 exemption amount was $53,600 ($3,400 for married couples filing jointly). For tax year 2016, the 28% tax rate applies to taxpayers with taxable incomes above $186,300 ($93,150 for married individuals filing separately).
- The tax year 2016 maximum Earned Income Credit amount is $6,269 for taxpayers filing jointly who have three or more qualifying children, up $17 from tax year 2015. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
- For tax year 2016, the monthly limitation for the qualified transportation fringe benefit remains at $130 for transportation, but rises $5 from 2015 -- to $255 for qualified parking.
- For tax year 2016 participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,250, up $50 for tax year 2015; but not more than $3,350, $50 more than in tax year 2015. For self-only coverage the maximum out of pocket expense amount remains at $4,450. For tax year 2016 participants with family coverage, the floor for the annual deductible remains as it was in 2015 -- $4,450, however the deductible cannot be more than $6,700, up $50 from the limit for tax year 2015. For family coverage, the out of pocket expense limit remains at $8,150 for tax year 2016 as it was for tax year 2015.
- For tax year 2016, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit rises $1,000 from tax year 2015 -- to $111,000.
- For tax year 2016, the foreign earned income exclusion is $101,300, up $400 from tax year 2015.
- Estates of decedents who die during 2016 have a basic exclusion amount of $5,450,000, compared with a total of $5,430,000 for estates of decedents who died in 2015.