2016 IRS Tax Brackets

The brackets will rise about 0.5 percent, the IRS said, meaning a $50 increase for single filers in the lowest tax bracket up to a $2,100 increase for married filers in the highest tax bracket.

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The standard deduction for 2016 income will stay the same, with the exception of filers who are heads of household. They will receive a $50 boost, to $9,300. The deduction for singles and “married filing separately” will be $6,300. The deduction for married filers will be $12,600.

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The personal exemption will rise by $50 in 2016, to $4,050.  Since 2013, the personal exemption phaseout—or PEP—has reduced or eliminated personal exemptions for higher-income taxpayers.

For every $2,500 of income above the PEP limits, taxpayers lose 2 percent of the value of their personal exemptions.  This is roughly equal to an additional 1.1 percent tax for each exemption, or an added 4.3 percent for a family of four subject to the phaseout.

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Since the IRS in 2013 reinstated the limitation on itemized deductions—or “Pease,” after the late Rep. Donald J. Pease, R-Ohio— taxpayers lose 3 cents of itemized deductions for each dollar of income above the Pease limits (beginning at the same level as PEP), not to exceed 80 percent of total deductions.

This translates into an extra 0.9 percent to 1.2 percent tax, depending on the taxpayer’s marginal bracket.

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The Alternative Minimum Tax begins at income levels of $53,900 for singles and $83,800 for married couples.  The initial tax rate is 26 percent and rises to 28 percent at an income level of $186,300 for both single and married taxpayers.  The corresponding income levels for “married filing separately” taxpayers are $41,900 and $93,150.

The initial AMT exemption amounts—$53,900 for singles, $83,800 for married couples, and $41,900 for “married filing separately”—begin to phase out at respective income levels of $119,700, $159,700 and $79,850.  The 25 percent phaseout increases the 26 percent rate to 32.5 percent and the 28 percent rate to 35 percent.

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The exclusion for public transportation benefits remains unchanged at $130 per month, while the qualified parking exclusion will rise by $5 to $255.

The annual gift tax exclusion also is unchanged at $14,000 per person, while the estate tax exemption will rise from $5.43 million to $5.45 million.

Penalty for the Uninsured

Under the Affordable Care Act, also known as Obamacare, individuals who choose not to get health insurance through government exchanges, on their own or via their employers have to pay an additional tax.

If you do not have health insurance coverage in 2015, you’ll have to pay the higher of these two amounts:

  • 2 percent of your yearly income above the tax-filing threshold (generally about $10,150) up to a maximum cost of the national average premium to purchase a Bronze Plan from the federal healthcare exchange. Or …
  • $695 per person ($347.50 per child under 18). The maximum penalty per family using this method is $2,085.

Those costs have more than tripled from calendar year 2014 when the penalty was $95 per person or 1 percent of household income.

New Tax Filing Date for 2016

This year individuals will have a few extra days to put their paperwork together and file it with the IRS. Taxpayers will have until April 18, 2016 to file their 2015 tax return, special thanks to District of Columbia holiday called Emancipation Day. Taxpayers in Maine and Massachusetts get an additional day to accommodate Patriots Day, with tose state returns due April 19, 2016