How Tax Rates & Brackets Will Change in 2016

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.TaxRatesCharters2016

Singles

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

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.

Image credit: GotCredit

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johnAbout john
Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

Huddleston Tax CPAs of Seattle & Bellevue
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Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching, Quickbooks consulting, bookkeeping, payroll and business valuation services for small business. We serve Seattle, Bellevue, Redmond, Tacoma, Everett, Kent, Kirkland, Bothell, Lynnwood, Mill Creek, Shoreline, Kenmore, Lake Forest Park, Mountlake Terrace, Renton, Tukwila, Federal Way, Burien, Seatac, Mercer Island, West Seattle, Auburn, Snohomish and Mukilteo. We have a few meeting locations. Call to meet John Huddleston, J.D., LL.M., CPA, Tawni Berg, CPA, Jennifer Zhou, CPA, Jessica Chisholm, CPA or Chuck McClure, CPA. Member WSCPA.