Sunday, January 31, 2016

Update: Getting Ready for Taxes in 2016

Stay ahead of the tax game and learn what will be new in the tax laws for 2016.

Be aware of the Affordable Care Act Penalties for those who choose to opt out of what is popularly known as Obamacare. What are essentially taxes on people who do not purchase health insurance will rise in 2016 to $2,085, which is the premium cost for the national average of the Bronze Plan listed on the federal health exchange. In order to avoid paying this penalty a person must either carry health insurance coverage, or get a plan at the latest during the first two months of 2016.

Personal exemptions will go up by $50 in 2016, to $4,050. This deduction however, has been eliminated for people in the higher income brackets. The standard deduction has gone up a bit for the head of the household.

Head of households with families can add an additional $100 to their Health Savings Account for a total of $6,750 for the year. Individuals, though, can only contribute up to $3,350, the same as in 2015.

Since April 15 this year falls on a Friday and also happens to be a federal holiday, the deadline has been extended to April 18.

The Earned Income Credit is going up in 2016, but don’t get too excited, its not by that much. For three qualified children the increase is $27, to $6,269. With two children the rise is $24, with a maximum of $5,572. Families with just one child can max-out at $3,373, a $14 increase. If you do not have any children, your increase is just $3 and give you a deduction of $506.

There are several tax breaks that are still relevant in 2016. For teachers they can still take a maximum of $250 on expenses for classroom supplies that did not get reimbursed.

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