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Tax Tip of the Week | No. 357 | 2016 Cost-of-Living Adjustments June 1, 2016

Posted by bradstreetblogger in : General, tax changes, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes , trackback

Tax Tip of the Week | June 1, 2016 | No. 357 | 2016 Cost-of-Living Adjustments

Keep in mind these cost-of-living increases for various tax exemptions and deductions, taxable income, and contributions limits:
  • Personal exemptions. They jumped from $4,000 to $4,050 in 2016.
  • Income tax brackets. The 2016 income tax brackets rose by 0.4% from 2015. Remember, tax brackets are based on taxable income—not gross income!
  • The lifetime individual gift and estate tax exemption for unified credit has risen by $20,000 to $5.45 million, and there will also be an upward adjustment in 2017.
  • HSAs. For family policies, the annual contribution limit on an HSA connected to a high-deductible plan has increased by $100 this year to $6,750, with the additional $1,000 catch-up contribution allowed for those 55 and older.
  • Roth IRAs. The phase-out range on 2016 Roth IRA contributions has become $117,001-$132,000 for single filers and heads of household, and $184,001-$194,000 for joint filers. These ranges are $1,000 higher than they were in 2015.
  • Standard deduction for head of household. If clients file their federal tax returns using a head of household status, their standard deduction is $50 dollars higher than it was in 2015—it has risen to $9,300!
  • AMT exemption. In 2016, the alternative minimum tax exemption jumped by $300 to $53,900 for single filers and by $500 to $83,800 for joint filers.
However the following income, contribution, and deduction limits DID NOT get a cost-of-living adjustment:
  • Social Security benefits.
  • Social Security tax. $118,500 limit on income subject to Social Security tax.
  • IRA contribution limit. $5,500 for 2016, with an additional $1,000 catch-up contribution allowed for those who turn 50 or older by the end of 2016.
  • IRA AGI deduction phase-out limit. $98,000 for those married filing jointly and $61,000 for single filers and heads of household.
  • Elective deferral limits for 401(k), 403(b), and 457 plans. $18,000 this year, with an extra $6,000 catch-up contribution allowed for those who turn 50 or older by the end of 2016.
  • The 401(a) defined contribution plan contribution limit. $53,000 for 2016.
  • Retirement plan contribution limits. $53,000 for SEP plans and $12,500 for SIMPLE plans this year. SIMPLE plan catch-up contribution limit remains at $3,000.
  • SEP minimum and maximum compensation limits. $600 for the minimum and $265,000 for the maximum.
  • The Employee Stock Ownership Plan (ESOP) maximum balance. $1,070,000.
  • The amount for lengthening of a 5-year ESOP period. $210,000.
You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.


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