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2016 tax data–knowledge is power

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The IRS has released the tax information employees need to more closely match their 2016 withholding to their 2016 income tax liability. It has also provided inflation-adjusted figures for employees who must file new W-4s because their personal exemptions and itemized deductions will be phased out and for low-income employees who may qualify for the earned income credit. (Rev. Proc. 2015-53, IRB 2015-44)

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 phase 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 credit. Depending on family size and wages, low-income employees may qualify for the earned income  credit. The credit is phased out at certain income levels.

  • One child: The maximum credit is $3,373. The credit begins to be phased out for income exceeding $18,190 (singles/heads of households) or $23,740 (joint filers) and is completely phased out when wages exceed $39,296 (singles) or $44,846 (joint filers).
  • Two children: The maximum credit is $5,572. The credit begins to be phased out for income exceeding $18,190 (singles/heads of households) or $23,740 (joint filers), and is completely phased out when wages exceed $44,648 (singles) or $50,198 (joint filers).
  • Three or more children: The maximum credit is $6,269. The credit begins to be phased out  for income exceeding $18,190 (singles/heads of house­­holds) or $23,740 (joint filers), and is com­­pletely phased out when wages exceed $47,955 (singles) or $53,505 (joint filers).
  • No children: The maximum credit is $506. The credit begins to be phased out for income exceed­­ing $8,270 (singles/heads of households) or $13,820 (marrieds filing jointly), and is completely phased out when wages exceed $14,880 (singles) or $20,430 (joint filers).

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