2016 Tax Law Changes that May Affect Your Returns
Spring means tax time and big headaches for many individuals and businesses. There’s nothing worse than spending a beautiful afternoon hunched over stacks of paperwork trying to figure out exactly what you owe. In 2016, several changes to the tax code could make the process harder, or they could bring a happy surprise in the form of greater deductions for many.
1. Higher Affordable Care Act Penalties
If you remain without qualifying health insurance under the Affordable Care Act (ACA), you’ll be paying more in penalties this year. The new rate is set at $695 per adult or 2.5 percent of income. To make this less of a burden for families, a maximum penalty of $2,085 has been set. Be sure to find out whether or not your insurance plan qualifies, so that you know if the fee applies to you.
2. Small Tax Bracket and Personal Exemption Increases
While deductions for single filers and married couples filing jointly remain the same in 2016, the head-of-household deduction has increased from $50 to $9,300. Personal exemptions mirror this increase and are now $4,050. New tax bracket adjustments place single filers who earn at least $415,050 and married filers who earn at least $466,950 under the 39.6 percent tax rate.
3. Greater Earned Income Tax Credit (EITC) Value
The EITC for filers with three or more qualifying children has been set at $6,269 for 2016. Those with two qualifying children receive $5,572, and one qualifying child earns a credit of $3,373. Filers with no children may get $506. A little extra money never hurts, especially at tax time and with expenses such as summer camp registration coming up in a few short months.
4. New Equipment Deduction for Small Businesses
A new part of the tax code, called Section 179, now allows businesses to deduct up to $500,000 on their equipment. To qualify, the equipment must have been used primarily for business purposes during 2015. The definition of “equipment” is broad and may include everything from desks to large industrial machinery. This changes the previous rule that limited deductions to smaller yearly amounts based on average equipment lifespan.
5. Rising Alternative Minimum Tax Exemption
The amount used to calculate taxable income under the alternative minimum tax (AMT) is going up this year. It now begins at $53,900 for individuals and phases out at $119,700. For married couples filing jointly, the AMT exemption threshold starts at $83,800 and phases out at $159,700. This amounts to an increase of a few hundred dollars for all filers.
These five 2016 tax law changes are just a few of the new regulations in the U.S. tax code. To ensure that you’re complying with all the laws, you might want to enlist the help of an experienced accountant. Having someone else look over your taxes or handle the filing process for you can eliminate a lot of the pressure associated with tax time and make your job much easier.
At Verdeja & De Armas, our team of Miami tax consultants is dedicated to providing independent and unbiased tax recommendations for businesses and business interests of all sizes. Contact us today for a tax consultation!