It is essential that you know how the tax system is going to change ahead of time. This will help you plan so you can pay as little as possible. 2016 will see a number of alterations to the tax system, and we are going to look at some of the more important alterations below.
Single people can now earn $9,275 before they have to leave that precious 10% income bracket. Remember, this only applies to taxable income.
Couples can earn up to $18,550 in taxable income before they have to pay above 10% of their income. This also applies to surviving spouses. It does not apply to couples who decide to file individually, however.
Deductions and Exemptions
In 2016, the standard deduction for heads of household will rise to $9,300 from $9,250. The other standard deduction amounts for other taxpayer categories will remain unchanged.
Personal exemptions go up to $4,050 in 2016, which is an increase from $4,000 in 2015. The Alternative Minimum Tax exemption goes up to $53,900 for singles and $83,800 for married couples who decide to file jointly.
Other Major Changes
The other major changes are as follows:
- Maximum Earned Income Credit is $6,269, up from $6,242.
- The monthly limit for transportation benefits has stuck at $130. For qualified parking, the amount has gone up to $255, which is an increase from $250.
- Foreign earned income exclusion is $101,300, which is an increase from $100,800.
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