The IRS released everything you wanted to know about 2016 taxes but were afraid to ask. Here’s the roundup. (Rev. Proc. 2016-53, IRB 2016-44)
Personal exemption amount
The personal exemption amount, which doubles as the annual withholding allowance amount, increases $50 in 2016, to $4,050. To get the withholding allowance amount for your pay period, divide by the appropriate divisor: 52, for weekly pay periods; 26, for biweekly pay periods; 24, semimonthly pay periods, etc.
Rage over a lost penny: Be careful how you round. The IRS doesn’t always round to the nearest tenth. Your best bet is to wait until the IRS releases Notice 1036, which will contain the official withholding allowance amounts and the percentage method withholding tables.
Standard deductions and phaseout amounts
The 2016 standard deduction amounts are:
- Singles and marrieds filing separately: $6,300
- Marrieds filing jointly: $12,600
- Heads of households: $9,300
- Dependents: the greater of $1,050 or the sum of $350 and their earned income, up to the standard deduction amount
- Extra standard deduction for aged or blind: $1,550 (singles) or $1,250 per eligible spouse (marrieds filing jointly).
The income limits at which personal exemptions and itemized deductions must be phased out also change for 2016. For joint filers, both limits start at $311,300; for single taxpayers, both limits start at $259,400.
Earned income tax credit
Depending on family size and wages, low-income employees may qualify for the earned income tax credit. The credit is phased out at certain income levels.
For 2016, the maximum EIC credit ranges from $506 for taxpayers with no children, to $6,269 for taxpayers with three or more children. The credit begins to phase out for single filers earning more than $18,190 and for marrieds filing jointly who earn more than $23,740.