On October 21, 2015 the IRS announced the inflation adjustments that affect tax brackets, personal exemptions, standard deductions, the AMT and many other items. Most amounts increased by about 0.4%. However, since most automatic adjustments are rounded to the nearest $50, $100, $500 or $1000, the exact percentage change will vary from item to item. (The exact, un-rounded amounts, however, do remain in the background and will be used as the starting points for making all the inflation adjustments next year.)
For 2016 the standard deduction will be $6,300 (single) or $12,600 (joint), plus the additional amount for over 65 or blind. These amounts are the same as for the year 2015. (Oddly, the standard deduction amount for HoH will increase by $50.) The personal exemption amount increases $50 per person to $4,050.
The estate tax exclusion of decedents who die during 2016 increases to $5,450,000, up from $5,430,000 for estates of decedents who died in 2015. One item that did not increase is the annual gift tax exemption, remaining at $14,000, the same as for the three previous years. The gift tax exemption is subject to automatic inflation adjustments, but it isn't increased until the cumulative adjustments are $1,000. Accordingly, at the current rate of inflation this particular exclusion will increase by $1,000 about once every four or five years.
The tax rate brackets that will be in effect for 2016 are contained in Rev Proc 2015-53, and this Rev Proc contains all the inflation adjusted rates, deductions, exemptions, credits, phase-out levels, etc. for the year 2016. Here's a link:
Keep in mind that this information all pertains to the tax year 2016 ... i.e. for tax returns that will be filed in 2017 ... and it will be useful for those wishing to do tax planning for themselves and their clients for the upcoming year.
For 2016 the standard deduction will be $6,300 (single) or $12,600 (joint), plus the additional amount for over 65 or blind. These amounts are the same as for the year 2015. (Oddly, the standard deduction amount for HoH will increase by $50.) The personal exemption amount increases $50 per person to $4,050.
The estate tax exclusion of decedents who die during 2016 increases to $5,450,000, up from $5,430,000 for estates of decedents who died in 2015. One item that did not increase is the annual gift tax exemption, remaining at $14,000, the same as for the three previous years. The gift tax exemption is subject to automatic inflation adjustments, but it isn't increased until the cumulative adjustments are $1,000. Accordingly, at the current rate of inflation this particular exclusion will increase by $1,000 about once every four or five years.
The tax rate brackets that will be in effect for 2016 are contained in Rev Proc 2015-53, and this Rev Proc contains all the inflation adjusted rates, deductions, exemptions, credits, phase-out levels, etc. for the year 2016. Here's a link:
Keep in mind that this information all pertains to the tax year 2016 ... i.e. for tax returns that will be filed in 2017 ... and it will be useful for those wishing to do tax planning for themselves and their clients for the upcoming year.
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