Important changes for 2016 tax year

 

Each year there are changes to the tax law. Here are a few changes which affect the tax filing. These might be of interest to you and are pertinent to your situation.

 

The Affordable Care Act continues through 2017. After that we do not know if there is a replacement plan or how it will look. The penalty for the uninsured during 2016 is $695 or 2.5% of household income.

The Standard Deduction is as follows: Single $6350 with an additional $1250 for a person over 65 years of age; Married Filing Joint $12700 with an additional $1250 for each person over 65 of age; Head of Household is $9350 with an additional $1250 for persons over 65 years of age.

 

The Gift Tax Exclusion remains at $14,000.

 

Car Allowance set by the federal government for business is $53.5 per mile. The Medical Car Allowance is $.17 per mile. The Charitable Car Allowance is $.14 per mile.

 

Personal Exemption remains at $4,050.

 

The Educator Expense remains at $250.

 

The Estate and Gift Tax Exemption remains at $5,450,000.

 

The IRA and ROTH IRA limits are $5500 plus $1000 for catch-up contributions for taxpayers over 50 yrs.

 

The Income Ceiling for the ROTH IRA phase out at AGIs of $184,000 to $194,000 for Married Filing Joint and $61,000 to $71,000 for Single taxpayers.

 

The American Opportunity Credit is available for the first four years of undergraduate work at college or university. The maximum credit is $2500. The phase out of the credit is when the income is $80,000 to $90,000 for single taxpayers and $160,000 to $180,000 for Married Filing Joint. The student must have a 1098T which can be obtained from the school of higher education website.

 

The Solar Energy Credit for 30% will extend through 12/31/19. The credit will be reduced to 26% in the year 2020 and 21% in 2021.

 

The maximum FICA wage base has risen to $127,200. Over this amount no FICA tax is collected. The maximum FICA collected each year is $9731.

 


Tax tip: organizing your expenditures by category throughout the year will save time during tax season.

Copyright 2017