I am continuing with tax tips, so that this year you can get the most money ever on your refund. If you owe money to IRS, you should read my tax tips, so you can lower that amount. I hope that all of you with more information about filing taxes will share it with us, so won’t have to mess with the IRS.
Today’s topic is Deductions. The first question that you should consider to itemize or should you take a deduction? Here are some changes that IRS made for the year 2016. The bottom line is if your deductions are more than the standard deductions, itemize. If your standard deductions are less than the standard deductions, take the standard deductions. Here is some information that help you decided. The IRS made changes because of inflation.
- The standard deduction for heads of household rises to $9,300 for tax year 2016, up from $9,250, for tax year 2015.The other standard deduction amounts for 2016 remain as they were for 2015: $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly.
- The limitation for itemized deductions to be claimed on tax year 2016 returns of individuals begins with incomes of $259,400 or more ($311,300 for married couples filing jointly).
- The personal exemption for tax year 2016 rises $50 to $4,050, up from the 2015 exemption of $4,000. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $259,400 ($311,300 for married couples filing jointly). It phases out completely at $381,900 ($433,800 for married couples filing jointly.)
- The tax year 2016 maximum Earned Income Credit amount is $6,269 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,242 for tax year 2015. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
- For tax year 2016, the monthly limitation for the qualified transportation fringe benefit remains at $130 for transportation, but rises to $255 for qualified parking, up from $250 for tax year 2015.
- For tax year 2016 participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,250, up from $2,200 for tax year 2015; but not more than $3,350, up from $3,300 for tax year 2015. For self-only coverage the maximum out of pocket expense amount remains at $4,450. For tax year 2016 participants with family coverage, the floor for the annual deductible remains as it was in 2015 — $4,450, however the deductible cannot be more than $6,700, up $50 from the limit for tax year 2015. For family coverage, the out of pocket expense limit remains at $8,150 for tax year 2016 as it was for tax year 2015.
- For tax year 2016, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $111,000, up from $110,000 for tax year 2015.
- For tax year 2016, the foreign earned income exclusion is $101,300, up from $100,800 for tax year 2015. References https://www.irs.gov/uac/newsroom/in-2016-some-tax-benefits-increase-slightly-due-to-inflation-adjustments-others-are-unchanged