The IRS has announced the annual inflation adjustments for the 2016 tax year as well as other 2016 tax changes resulting from recently passed legislation. The following table gives you a general overview of the 2016 adjustments and changes. As always, you should consult your own tax advisor for information and advice on how these rates and changes apply to your specific situation.
| Gift Tax | 2016 | 2015 |
| Annual gift tax exclusion (per recipient other than a spouse)
|
$14,000
|
$14,000
|
| Annual gift tax exclusion for gifts to a spouse who is US citizen
|
Unlimited
|
Unlimited
|
| Annual gift tax exclusion for gifts to a spouse who is not a US citizen
|
$148,000
|
$147,000
|
| Estate Tax | 2016 | 2015 |
| Federal estate tax exemption amount
|
$5,450,000
|
$5,430,000
|
| Maximum federal estate tax rate
|
40%
|
40%
|
| IRAs-Roth and Traditional | 2016 | 2015 |
| IRA contribution limit (not to exceed 100% of earned income)
|
$5,500
|
$5,500
|
| IRA catch-up contributions (not to exceed to 100% of earned income) for account owners age 50 or older
|
$1,000
|
$1,000
|
| Income Limits for Contributing to a Roth IRA | 2016 | 2015 |
| Limitation on ROTH IRA contributions by married couples and surviving spouses filing joint returns
|
Begins at AGI of $184,000
|
Begins at AGI of $183,000
|
| Limitation on ROTH IRA contributions by unmarried individuals and heads of households
|
Begins at AGI of $117,000
|
Begins at AGI of $116,000
|
| Limitation on ROTH IRA contributions by married individuals filing separate returns
|
Begins at AGI of $-0-
|
Begins at AGI of $-0-
|
| Deduction Phase-Out for Traditional IRAs | 2016 | 2015 |
| Married couple filing joint returns where the IRA contributor is covered by a workplace retirement plan
|
AGI between $98,000 and $118,000
|
AGI between $98,000 and $118,000
|
| Married couple filing joint returns where the IRA contributor is not covered by a workplace retirement plan but the spouse is covered
|
AGI between $184,000 and $194,000
|
AGI between $183,000 and $194,000
|
| Unmarried individuals and heads of households covered by a workplace retirement plan
|
AGI between $61,000 and $71,000
|
AGI between $61,000 and $71,000
|
| Married individual covered by a workplace retirement plan and filing a separate return
|
AGI between $0 and $10,000
|
AGI between $0 and $10,000
|
| 401(k), 403(b), Profit-Sharing Plan Limits | 2016 | 2015 |
| Maximum annual compensation amount taken into account when determining employer and employee contributions
|
$265,000
|
$265,000
|
| Elective deferrals for traditional and safe harbor 401(k) plans and for 403(b) plans
|
$18,000
|
$18,000
|
| Elective deferrals for SIMPLE 401(k) plans
|
$12,500
|
$12,500
|
| Catch-up contributions for traditional 401(k) plans, safe harbor 401(k) plans, and 403(b) plans for employees age 50 or older
|
$6,000
|
$6,000
|
| Catch-up contributions for SIMPLE 401(k) plans for employees age 50 or older
|
$3,000
|
$3,000
|
| Total annual contribution limit for all accounts maintained by one employer (not to exceed 100% of compensation)
|
$53,000 (plus catch-up contributions for employees 50 or older)
|
$53,000 (plus catch-up contributions for employees 50 or older)
|
| Income Tax-Standard Deduction | 2016 | 2015 |
| Standard deduction for unmarried individuals and for married individuals filing separately
|
$6,300
|
$6,300
|
| Standard deduction for married couples filing joint returns
|
$12,600
|
$12,600
|
| Standard deduction for heads of households
|
$9,300
|
$9,250
|
| Income Tax-Itemized Deductions | 2016 | 2015 |
| Itemized deduction limitation for unmarried individuals (other than surviving spouses filing joint returns or heads of households)
|
Begins at AGI of $259,400
|
Begins at AGI of $259,400
|
| Itemized deduction limitation for married couples and surviving spouses filing joint returns
|
Begins at AGI of $311,300
|
Begins at AGI of $309,900
|
| Itemized deduction limitation for heads of households
|
Begins at AGI of $285,350
|
Begins at AGI of $284,050
|
| Itemized deduction limitation for married individuals filing separate returns
|
Begins at AGI of $155,650
|
Begins at AGI of $154,950
|
| Income Tax-Personal Exemption | 2016 | 2015 |
| Personal exemption amount
|
$4,050
|
$4,000
|
| Phase out of personal exemption for unmarried individuals (other than surviving spouses and heads of households)
|
AGI between $259,400 and $381,900
|
AGI between $258,250 and $380,750
|
| Phase out of personal exemption for married couples and surviving spouses filing joint returns
|
AGI between $311,300 and $433,800
|
AGI between $309,900 and $432,400
|
| Phase out of personal exemption for heads of households
|
AGI between $285,350 and $406,550
|
AGI between $284,050 and $406,550
|
| Phase out of personal exemption for married individuals filing separate returns
|
AGI between $155,650 and $216,900
|
AGI between $154,950 and $216,200
|
| Employer Sponsored Flex Plans | 2016 | 2015 |
| Annual limit on employee contributions to employer-sponsored healthcare flexible spending arrangements
|
$2,550
|
$2,550
|
| Domestic Employees-Social Security and Medicare | 2016 | 2015 |
| Threshold wage amount for withholding Social Security (FICA) and Medicare taxes from cash wages paid to child care, house cleaning, etc. employees who are over 18 and not members of the employer’s immediate family, and threshold wage amount for the employer to be required pay its portion of such taxes
|
$2,000
|
$1,900
|
| Social Security Tax to be withheld from each employee’s wages
|
6.2% of the first $118,500 of wages
|
6.2% of the first $118,500 of wages
|
| Medicare Tax to be withheld from each employee’s wages
|
1.45% of the first $200,000 wages ($250,000 for joint return and $125,000 for married filing separately)
|
1.45% of the first $200,000 of wages ($250,000 for joint return and $125,000 for married filing separately)
|
| Additional Medicare Tax to be withheld from each employee’s wages
|
2.35% of wages in excess of $200,000 ($250,000 for married filing jointly and $125,000 for married filing separately)
|
2.35% of wages in excess of $200,000 ($250,000 for married filing jointly and $125,000 for married filing separately)
|
| Employer’s portion of Social Security Tax
|
Amount equal to 6.2% of the first $118,500 of employee’s wages
|
Amount equal to 6.2% of the first $118,500 of employee’s wages
|
| Employer’s portion of Medicare Tax
|
Amount equal to 1.45% of employee’s first $200,000 of wages
|
Amount equal to 1.45% of employee’s first $200,000 of wages
|
| Employer’s share of Additional Medicare Tax
|
-0-
|
-0-
|
| Standard Mileage Rates for Computing Deductible Costs of Operating Automobiles for Business, Medical, Moving and Charitable Purposes
|
2016 | 2015 |
| Miles driven for business
|
$.54/mile
|
$.575/mile
|
| Miles driven for medical or moving purposes
|
$.19/mile
|
$.23/mile
|
| Miles driven in service of charitable organizations
|
$.14/mile
|
$.14/mile
|
Sources: IR-2015-137; IR-2015-118; IR-2015-19; Rev. Proc. 2015-53; Notice 2016-1;IR-2015-119; IRS Topic 756; http://www.irs.gov/Retirement-Plans/COLA-Increases-for-Dollar-Limitations-on-Benefits-and-Contributions; https://www.ssa.gov/news/press/factsheets/colafacts2016.html
The information in this article is provided for general informational purposes only and should not be considered tax or legal advice. You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.
If you have any questions about how the information in this article may affect you or your business, please contact Carolyn Hegge at chegge@stroudlaw.com or (608) 257‑2281 or your Stroud attorney.
DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice. This article is not intended to create, nor does the receipt of it constitute, an attorney-client relationship. You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.
