Here’s an excerpt from the Guide on The Current Tax Climate:
Every year brings tax changes and 2016 is no different. At the end of 2015, Congress approved the Protecting Americans from Tax Hikes Act of 2015 (PATH) which makes many tax breaks permanent and extends others for two or more years. It also phases several out and includes a few modifications. As we move forward into 2016, here are some of the highlights:
Most of the tax brackets are rising by about 0.5% with the government inflation benchmarks. For individuals the top tax rate of 39.6% applies to those with taxable income of $415,050 for 2016, up from $413,000 in 2015, and $466,951 for married filers, up from $464,850 in 2015. Standard deduction for heads of household will increase $50 to $9,300 in 2016. Personal exemptions will increase from $4,000 in 2015 to $4,050 in 2016. Estates will have an exemption of $5,450,000 in 2016, up $20,000 from 2015.
With the implementation of the Affordable Care Act (ACA) in 2014, most individuals who do not carry health insurance will face a penalty. For 2016, penalties will rise to $695 per adult, or 2.5% of income. The family maximum is set at $2,085 in 2016, up from $975 in 2015, and $285 in 2014.
Unchanged in 2016 is the maximum amount workers can contribute to their 401(k). This stays at $18,000 ($24,000 for workers over age 50 in 2016). IRA amounts also stay the same ($5,500 and $6,500 for those over the age of 50).
Given the changing nature of tax law and the complexity of our tax rules, planning is essential. However one thing is guaranteed, the debate over tax reform will continue. Both individuals and businesses should become aware of these changes in order to prepare for any modification to a new tax code. We can help keep you informed of legislative action that may affect your tax situation and develop tax-efficient strategies for you right now and in the future.
If you have any questions about tax planning, please contact your Miller Cooper representative.