5…4…3…2…1….. Happy Tax Season 2016!
With the new year comes promises to lose weight, shiny new engagement rings, and of course…annual tax updates. While most tax laws remain consistent from one year to the next, there are some that change.
We are here to share a sneak peek of 7 tax updates coming your way for 2016. Let’s get started.
1. Tax Day is April 18th this year.
Since April 15th falls on Washington D.C. Emancipation Day, the tax deadline date will extend to the following Monday, April 18th. Are you among the lucky ones living in a New England state? Extend that deadline one more day to April 19th.
2. Tax penalties related to Obamacare are increasing yet AGAIN.
If you’ve reached the ripe ol’ age of 26, then you’re familiar with health insurance and the recent changes to it via Obama. For those without coverage last year, a penalty of $285 (or 2% of income above the filing limit) was billed to them. Still don’t have coverage for 2016? If you don’t apply for an eligible health care plan, then the tax penalty could hit an all-time high of $695 per adult (or 2.5% of income).
3. The Earned Income Credit is increasing.
2016 brings a small but modest increase to the EIC. If you are a taxpayer with three or more qualifying dependent children, then the maximum credit will be increasing by $27 to $6,269. For those with two dependent children, your maximum will be increasing by $24 to $5,572. For those taxpayers with an only child, you can receive a maximum of $3,373 which is up $14 from 2015. No kids to worry about? You’ll still get an increase of $3 from last year which will leave you with $506 for 2016.
4. Personal exemptions are on the rise.
Each taxpayer is entitled to claim a personal exemption for themselves. In 2016, the amount will increase by $50. This will give everyone an exemption amount of $4,050.
5. Contribution amounts on HSAs are increasing.
High deductible health plans will sometimes involve health savings accounts which allow people to set aside money on a pre-tax basis to cover their healthcare costs. The contribution limit for individual policies in 2016 will stay at $3,350. On the other hand, if you are on a family policy, then the maximum amount that you can contribute will increase by $100 to $6,750.
6. Tax brackets are increasing…slightly.
Based on your annual income, you are ‘assigned’ to a specific tax bracket. These income brackets will be increasing by 0.4% in 2016.
7. Standard deductions are increasing for head of household filers.
There will be an increase of $50 for head of household filers in 2016. This brings the standard deduction to $9,300. All other filing statuses will be ringing in the new year with the same rates as 2015.
Even if that New Year’s resolution didn’t work out…
If your scale isn’t cooperating or your significant other decided on the gift card over the diamond ring you were eyeing, at least your taxes will be ready for 2016! Priortax can help you prepare your tax return this January. All you need to do is create an account and begin entering your information. We even have a team of tax pros to help you via phone, livechat or email.