Tax Day is NOT April 15th! (and Other Tax Changes for 2016)

Check out the list of tax changes for 20152016 brings us a new year, and with it new tax changes courtesy of the IRS.  Make sure you’re up to date on the latest changes – 2016 may be the Year of the Monkey, but don’t treat these changes like monkey business!  The following list is not all-inclusive – I’ve simply hit some of the more notable changes.

Tax Day is April 18, 2016… For Most of Us

April 15th falls on a Friday this year, which is Emancipation Day in Washington, D.C.  In the event that the 15th falls on a holiday or weekend, by law it is extended to the following Monday, which in this case is April 18th.  However, for those of you in Massachusetts and Maine, Monday April 18th is Patriots’ Day, which means your Tax Day is Tuesday, April 19th.

Not Having Healthcare Will Be More Expensive

Starting in 2014, the Affordable Care Act imposed penalties on those not having qualifying health care coverage.  While it was a relatively small penalty in 2014, the penalty rose significantly in 2015 and will be even higher in 2016.

Rising Tax Brackets

Most tax brackets have been adjusted for inflation, rising by an average of 0.4%.

Head-Of-Household Standard Deduction Rises

For those qualifying for Head-Of-Household filing status, your standard deduction will be rising from $9,250 to $9,300.

Personal Exemptions Are Going Up

The personal exemption amount is increasing by $50, from $4,000 to $4,050 for 2016.

HSA Contribution Limits for Family Policies are Increasing

While the $3,350 limit for individual policies isn’t changing, the HSA contribution limit for family policies is increasing to $6,750.

The Earned Income Credit Will Be Slightly Higher

For 2016, those with three or more qualifying children will now see a maximum credit of $6,269; two children will now see a maximum of $5,572; one child will see a maximum of $3,373; and those without children will see a maximum of $506.

The Alternative Minimum Tax (AMT) Exemption Is Higher

The exemption is going up $500 for those filing Married Filing Jointly, and $300 for single taxpayers.

IRS Mileage Rates are Decreasing

For 2016, the standard mileage rate for business use is $0.54/mile, down from $.0575/mile.  Medical and Moving related mileage rates are now $0.19/mile, a reduction of $.04/mile.  The charitable mileage rate is unchanged at $0.14/mile.

The Foreign Earned Income Exclusion Is Rising

For 2016, the exclusion will be $101,300, an increase of $500.

You Will Need a 1098-T to Claim Educational Tax Benefits

Starting in 2016, in order to claim either the American Opportunity Credit or Lifetime Learning Credit, you must receive a 1098-T statement from your school.  The IRS wants proof that you’re actually attending class, as well as documentation on what you paid for “qualifying educational expenses.”

Tax Preparer Regulation Efforts Continue

The Annual Filing Season Program continues in 2016.  This program, started in 2015, as an effort by the IRS to encourage voluntary continuing education and testing for tax preparers.  If the preparer of a return is neither an Attorney, CPA, or Enrolled Agent (EA), and they have not participated in this program, as of January 1, 2016 they no longer have any rights of representation.  In other words, they may prepare returns only, and may not contact the IRS on a client’s behalf.

Some Things Aren’t Changing

Some items that commonly change are actually staying the same for 2016, including contribution limits to 401(k) plans and IRAs.

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