2016 Tax Law Changes and Useful Information
Will you be eligible for a tax break this year? Changes to federal tax laws started in 2015
may impact your 2016 returns. Here’s what you need to know.
- Increases to the personal exemption: The personal exemption increases from $4,000 to $4,050. It’s a slight increase, but every small tax break goes toward the bottom line.
- State and local income tax deduction: State and local income taxes remains an itemized deduction. This is important to remember because taxpayers living in states such as New York, New Jersey and Connecticut can expect to have a high state and local tax burden. These taxes remain deductible on Schedule A.
- Social Security: The Social Security wage base remains $118,500. This means that if you work for more than one employer and earn over this amount, excess Social Security may have been withheld. In this case, you may apply for a special refund on form 1040.
- Estate Tax: An increase in the federal estate tax to $5.45 million exemption, and a 40% maximum rate for those dying after 2015. This is a very complicated area of the tax code, but suffice to say these numbers can be used as guidelines when trying to determine if the estate tax may apply.
- Health coverage premium tax credits: To subsidize the cost of coverage, you may qualify for health premium tax credits if you obtained health insurance coverage through a qualified marketplace.
- Penalties for Failure to Carry Health Insurance (individual responsibility penalty): If you fail to carry the minimum essential health insurance, you can be assessed for each month you are uninsured. In 2016 the penalty increased to $695 per adult, or 2.5% of income with a family maximum of $2,085.
- Income exclusion of canceled debt on principal residence : Unfortunately, in this tough economy, may people fall behind on their mortgages and are facing foreclosure or a short sale. The law used to penalize these people twice. Once for the falling behind in the first place, and then taxing them when there was mortgage forgiveness or a short sale. Often times the lender would forgive the mortgage debt, but report this mortgage forgiveness as income to the Internal Revenue Service. This would result in additional taxable Income. Now, debt cancelled from the short sale, foreclosure, or mortgage modification for Qualified Principal Residences can be excluded from income under the Mortgage Forgiveness Debt Relief Act. This was extended to the end of 2016. This can also apply to debt that will be discharged in 2017 provided that there was a written agreement entered into in 2016.
- Winning Olympians Get Tax Break on Medals/Prize Money: Any winning Olympic Athletes and Paralympians who received medals or prize money with an adjusted gross income of $1 million or less can exclude these winnings from gross income.
- New Penalties for Filing Return Late: Those who file their returns late will face an increased penalty for failure to file if their return is more than 60 days late after the due date. The minimum penalty is either $205 or 100 percent of unpaid tax, whichever is less.
DID YOU KNOW?
Approximately 80% of all taxpayers receive a refund on their federal tax returns. Don’t chance leaving money on the table. Call the law offices of Daniel M. Silvershein today at 212.387.7880 or 888.382.7880.
Or email questions at firstname.lastname@example.org
2017 US. Master Tax Guide, 100 Edition; Wolters Kluwer, p 17.2016; www.Turbotax.intuit.com (“Summary of Federal Tax Law Changes for 2016 p.10)