Update Of Key 2016 Tax Figures

The following 2016 information is an update of the “Preview Of Some Key 2016 Tax Figures” article originally published last October (2015). The October 2015 publication was presented using estimated figures for 2016.

However, the IRS has recently released official 2016 tax figures. This being the case, what better time is there to start thinking about implementing a tax planning initiative focused on tax year 2016 activity? The following up-to-date figures will assist you with that initiative:

Tax Brackets For Taxable Years Beginning in 2016 (Per Rev. Proc. 2015-53):

TABLE 1 - Married Individuals Filing Joint Returns and Surviving Spouses

If Taxable Income Is:                           The Tax Is:

Not over $18,550                                    10% of the taxable income

Over $18,550 but                                    $1,855 plus 15% of
not over $75,300                                     the excess over $18,550

Over $75,300 but                                    $10,367.50 plus 25% of
not over $151,900                                   the excess over $75,300

 

Over $151,900 but                                  $29,517.50 plus 28% of
not over $231,450                                   the excess over $151,900

 

Over $231,450 but                                  $51,791.50 plus 33% of
not over $413,350                                   the excess over $231,450

 

Over $413,350 but                                  $111,818.50 plus 35% of
not over $466,950                                   the excess over $413,350

Over $466,950                                        $130,578.50 plus 39.6% of
                                                                the excess over $466,950

TABLE 2 – Heads of Households

If Taxable Income Is:                            The Tax Is:

Not over $13,250                                    10% of the taxable income

 

Over $13,250 but                                    $1,325 plus 15% of
not over $50,400                                     the excess over $13,250

 

Over $50,400 but                                    $6,897.50 plus 25% of
not over $130,150                                   the excess over $50,400

 

Over $130,150 but                                  $26,835 plus 28% of
not over $210,800                                   the excess over $130,150

 

Over $210,800 but                                  $49,417 plus 33% of
not over $413,350                                   the excess over $210,800

 

Over $413,350 but                                  $116,258.50 plus 35% of
not over $441,000                                   the excess over $413,350

 

Over $441,000                                        $125,936 plus 39.6% of
                                                                the excess over $441,000

TABLE 3 – Unmarried Individuals (other than Surviving Spouses and Heads of Households)

If Taxable Income Is:                            The Tax Is:

Not over $9,275                                      10% of the taxable income

 

Over $9,275 but                                      $927.50 plus 15% of
not over $37,650                                     the excess over $9,275

 

Over $37,650 but                                    $5,183.75 plus 25% of
not over $91,150                                     the excess over $37,650

 

Over $91,150 but                                    $18,558.75 plus 28% of
not over $190,150                                   the excess over $91,150

 

Over $190,150 but                                  $46,278.75 plus 33% of
not over $413,350                                   the excess over $190,150

 

Over $413,350 but                                  $119,934.75 plus 35% of
not over $415,050                                   the excess over $413,350

 

Over $415,050                                        $120,529.75 plus 39.6% of
                                                                the excess over $415,050

 

TABLE 4 – Married Individuals Filing Separate Returns

If Taxable Income Is:                            The Tax Is:

Not over $9,275                                      10% of the taxable income

 

Over $9,275 but                                      $927.50 plus 15% of
not over $37,650                                     the excess over $9,275

 

Over $37,650 but                                    $5,183.75 plus 25% of
not over $75,950                                     the excess over $37,650

 

Over $75,950 but                                    $14,758.75 plus 28% of
not over $115,725                                   the excess over $75,950

Over $115,725 but                                  $25,895.75 plus 33% of
not over $206,675                                   the excess over $115,725

Over $206,675 but                                  $55,909.25 plus 35% of
not over $233,475                                   the excess over $206,675

Over $233,475                                        $65,289.25 plus 39.6% of
                                                                the excess over $233,475

TABLE 5 – Estates and Trusts

If Taxable Income Is:                            The Tax Is:

Not over $2,550                                      15% of the taxable income

Over $2,550 but                                      $382.50 plus 25% of
not over $5,950                                       the excess over $2,550

Over $5,950 but                                      $1,232.50 plus 28% of
not over $9,050                                       the excess over $5,950

Over $9,050 but                                      $2,100.50 plus 33% of
not over $12,400                                     the excess over $9,050

Over $12,400                                          $3,206 plus 39.6% of
                                                                the excess over $12,400

Personal Exemption:                            $4,050 in 2016 ($4,000 in 2015)

Standard Deductions:

Deduction                                                Tax Year 2016                  Tax Year 2015

Single                                                        $6,300                               $6,300
Head of Household                                   $9,300                               $9,250
Married Filing Joint                                   $12,600                             $12,600
Married Filing Separately                          $6,300                               $6,300

Dependents (claimed on                           $1,050                               $1,050
another’s return)

65 or Blind: Married or Single                   Add $1,250                        Add $1,250
                                                                  Add $1,550                        Add $1,550

Other Key figures:

Estate & Gift Tax Exclusion                      $5.45 Million                      $5.43 Million
Annual Gift Tax Exclusion                        $14,000                              $14,000
Roth and Traditional IRA Contribution      $5,550                               $5,500

LIMIT
Exclusion from tax on a gift to a spouse    $148,000                          $147,000
who is not a U.S. citizen

Foreign earned income exclusion              $101,300                          $100,800

Phase in limitation for itemized                  $311,300                          $309,900
deductions to be claimed on returns of
individuals - Married

The annual dollar limit on employee          $2,550                              $2,550
contributions to employer-sponsored
healthcare flexible spending
arrangements (FSA).

 

Refer to IRC.gov (various) and Rev. Proc. 2015-53 for additional details concerning 2016 rates.

Category:

The PATH Act

Near the end of last year (December 2015), as PR News Wire notes, Congress passed and President Obama signed into law the Protecting Americans from Tax Hikes (PATH) Act, a broader bipartisan tax bill that extended (and in certain instances, made permanent) over 50 expiring provisions of the tax code.

A number of pro-business provisions, including the following examples, fall within the PATH Act’s legislation:

  • The following examples of tax provisions are made permanent by the PATH Act, as detailed in the Spokane Journal and quoted as follows:

    • Section 179 small-business expensing limit of $500,000 for qualified equipment:

      • Jason Munn, a tax partner at the Spokane office of Seattle-based accounting firm Moss Adams, says the permanent Section 179 provision enables businesses to deduct up to $500,000 for qualifying business equipment purchases. Starting next year, the cap will be indexed to inflation. The deduction phases out dollar for dollar once equipment purchases top $2 million, meaning it’s eliminated for equipment exceeding $2.5 million in value.

    • Research credit, which has been expanded to allow certain businesses to offset up to $250,000 in payroll taxes or alternative minimum tax:

      • Munn says the R&D credit, which enables some businesses to write off a portion of their research-and-development expenses, had expired in 2015. The PATH Act makes the R&D credit retroactive to include 2015.

      • Nick Dietzen, tax manager at the Spokane office of Minneapolis-based CliftonLarsonAllen LLP, says the R&D credit will benefit small startup companies, including software and app developers, during their first five years of operation because they can elect to apply some or all of the credit against the employer’s share of payroll taxes.

    • Exclusion of certain small-business stock sales from capital gains taxes:

      • This exclusion is meant to encourage investment in new ventures and small businesses. It applies to the sale or exchange of stock in small businesses with gross assets of less than $50 million acquired after Sept. 27, 2010, and held for at least five years.

    • Fifteen-year cost recovery for leasehold improvements to qualified retail and restaurant properties:

      • This provision allows for a 15-year recovery period for qualified interior improvements to nonresidential property that has been in service as retail or restaurant space for more than three years.

    • Charitable distributions of up to $100,000 from IRA’s for people at least 70 ½ years of age:

      • The provision enables individual tax filers age 70½ or older to make up to $100,000 in charitable distributions from their individual retirement accounts without having to declare the distributions as income.

    • Option to claim itemized deduction for state and local sales tax:

      • For individual filers, the PATH Act makes the deduction for state and local sales tax permanent.

    • 5-year recognition period for S-corporation built-in gain

    • Transit Benefits Parity

    • Treatment of certain dividends of regulated investment companies (RICs)

Note that the following examples of tax provisions are extended by the PATH Act. But not all extensions in the PATH Act are permanent:

  • Five Year Extenders of Expiring Tax Provisions (thru 2019)

    • Work Opportunity/New Markets Tax Credits, as follows:

      • The Work Opportunity Tax Credit (WOTC) is extended through 2019. The Act also enhances the WOTC for employers that hire certain long-term unemployed individuals.

      • The Act authorizes the allocation of $3.5 billion of new markets tax credits for each year from 2015 through 2019.

    • Look-through for controlled foreign corporations

  • Two Year Extension (thru 2016)

    • Film and television expensing

  • Energy Extenders

    • Wind Energy Credit (thru 2019 with phase-outs)

    • Solar Investment Credit (thru 2021)

      • The FY 2016 omnibus extends the solar investment tax credit and the credit for qualified residential solar property but subjects the credits to phase-down. Under the omnibus, both credits will not be available after 2021.

    • Energy Efficient Commercial Building deduction (thru 2016)

      • The Act extends through 2016 the deduction for energy-efficient commercial buildings. Additionally, the Act updates the energy-efficient standards.

As noted in the beginning of this article, the PATH Act extended (and in certain instances, made permanent) over 50 expiring provisions of the tax code. This foregoing write-up does not intend to address all 50+ provisions, but it is intended to provide a high level discussion of some of the extended provisions. There are additional affected provisions of the Act not included in the scope of this discussion.

Category:

Preview of Some Key 2016 Tax Figures

It’s never too early to begin detailed planning for next year’s taxes -- especially as we head into the final stretch of 2015 and get a better look at what the coming tax season has in store.

While official numbers for 2016 are not yet released by the Internal Revenue Service (IRS), many figures are formulas set within the Internal Revenue Code (IRC) or are based on the Consumer Price Index (CPI) published by the Department of Labor.

Based on recently released CPI indices, the following tax basis figures are noted here strictly for your planning purposes and not for the preparation of your tax 2016 tax filings.

Tax Brackets: While the actual income brackets for tax rates are not yet set for 2016, the rate of inflation that impacts the income levels for each tax rate is anticipated to raise the income brackets by approximately 1.60 -2.00%.

Personal Exemption: $4,100 in 2016 ($4,000 in 2015)

Standard Deductions:

Est standard deductions

Other Key figures:

Est other Key figures

 

CPI - https://www.bls.gov/cpi/cpid1508.pdf ; IRC.gov (various)

Category:

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