Key Tax Numbers for 2016

Social Security Wage Base, Self-employment Rate, Social Security and Medicare Rates - 2016

  • 2016 Social Security wage base is $118,500 (same as 2015).
  • Self-employed:
    • 2016 self-employment tax rate is 15.3%, which equals the Social Security rate of 12.4% plus the Medicare tax rate of 2.9%.
    • The 15.3% rate applies earnings of up to $118,500 after the earnings are reduced by 7.65%. Schedule SE is used to figure Self-employment tax.
    • If net earnings exceed $118,500, the 2.9% Medicare rate applies to the entire amount. There is no earnings limit for Medicare tax.
    • One half of the self-employment tax may be deducted on the first page of Form 1040 as an above-the-line deduction. This means, you don't have to itemize to claim this deduction.
  • Employees:
    • 2016 Social Security rate for employees and employers is 6.2% each ($7,347 each), for a total rate of 12.4%.
    • 2016 Medicare tax rate for employees and employers is 1.45% each, for a total of 2.9%.
    • Medicare tax is withheld from all wages regardless of amount.

Personal Exemption (for yourself and each dependent) - 2016

2016 - Each Allowable Exemption: $4,050

Phaseout of Exemption Starts / Ends:

  • Joint return/Qualifying widow(er): $311,300 / $433,800
  • Head of Household: $285,350 / $407,850
  • Single: $259,400 / $381,900
  • Married filing separately: $155,650 / $216,900

Standard Deduction - 2016

  • Married filing Joint return: $12,600
  • Qualifying widow(er): $12,600
  • Head of household: $9,300
  • Single: $6,300
  • Married filing separately: $6,300
  • Dependents - minimum deduction: $1,050
  • Additional Deduction if Age 65 or Older, or Blind - 2016 (born before January 2, 1952): Note that, if you turned 65 on January 1, you are considered to be 65 as of December 31 for purposes of this deduction):
    • Married-per-spouse, filing jointly or separately:
      • $1,250 ($2,500 for age and blindness)
    • Qualifying widow(er):
      • $1,250 ($2,500 for age and blindness)
    • Single or head of household:
      • $1,550 ($3,100 for age and blindness)

Capital Gain Rates for Assets Held Over One Year - 2016

Capital Gain Rates 2016
If your top bracket is... Your Maximum Rate is-
10% or 15% 0%
OVER 15% but below 39.6% 15%
39.6% 20%
Collectibles gain - maximum rate 28%
Unrecaptured Section 1250 gain on depreciated real estate - maximum rate

NOTE: Unrecaptured Section 1250 gain is figured on the "Unrecaptured Section 1250 Gain Worksheet" in Schedule D instructions. A net loss, if any, from the 28% group reduces unrecaptured Section 1250 gain. The effect of the computation on the Schedule D Tax Worksheet is to tax unrecaptured Section 1250 gain at either a 25% rate or at the regular rates on ordinary income, whichever results in a lower tax.
25%

Qualified Dividends Tax Rate - 2016

Qualified Dividend Rates - 2016
If Your Top Bracket Is... Your Qualified Dividends Rate is-
10% or 15% 0%
OVER 15% but below 39.6% 15%
39.6% 20%

IRS Mileage Rates 2016:

  • Business: 54 cents per mile
  • Medical and Moving: 19 cents per mile
  • Charitable volunteers: 14 cents per mile

Exclusion for Employer Provided Transportation for 2016

  • Free parking, transit passes, and van pooling: $255 per month
  • Qualified bicycle commuting: $20 per month

IRA Contributions for 2016

Traditional IRAs:

  • Traditional IRA contribution limit: $5,500
  • Additional contribution if age 50 or older but under 70 1/2: $1,000
  • Deduction phaseout for active plan participant:
    • Single or head of household: $61,000 - $71,000
    • Married filing jointly, two participants: $98,000 - $118,000
    • Married filing jointly, one participant:
      • Participant spouse: $98,000 - $118,000
      • Non-participant spouse: $184,000 - $194,000
      • Married filing separately, live together, either participates:
        • $0 - $10,000
    • Married filing separately, live apart all year:
      • Participant spouse: $61,000 - $71,000
      • Non-participant spouse: no phaseout

Roth IRAs:

  • Roth IRA contribution limit: $5,500
  • Additional contribution if age 50 or older but under 70 1/2: $1,000
  • Contribution limit phaseout range:
    • Single, head of household: $117,000 - $132,000
    • Married filing separately, live apart all year: $117,000 - $132,000
    • Married filing jointly, or qualifying widow(er): $184,000 - $194,000
    • Married filing separately, live together at any time: $0 - $10,000

Elective Deferral Limits - 2016

  • 401(k), 403(b), 457 plans: $18,000
  • Salary-reduction SEP: $18,000
  • SIMPLE IRA: $12,500
  • Additional contribution if age 50 or older:
    • 401(k), 403(b), governmental 457 and SEP plans: $6,000
    • SIMPLE IRA: $3,000

Education - 2016

  • American Opportunity credit limit-per student: $2,500
  • Lifetime Learning credit limit-per-taxpayer: $2,000
  • Phaseout of American Opportunity credit:
    • Married filing jointly: $160,000 - $180,000
    • Single, head of household, or qualifying widow(er): $80,000 - $90,000
  • Phaseout of Lifetime Learning credit:
    • Married filing jointly: $111,000 - $131,000
    • Single, head of household, or qualifying widow(er): $55,000 - $65,000
  • Student loan interest deduction limit: $2,500
    • Phaseout of deduction limit:
      • Married filing jointly: $130,000 - $160,000
      • Single, head of household, qualifying widow(er): $65,000-$80.000
  • Coverdell ESA limit: $2,000
    • Phaseout of limit:
      • Married filing jointly: $190,000 - $220,000
      • All others: $95,000 - $110,000
  • Tuition and fees deduction:
    • Tuition and fees deduction-tier 1 limit: $4,000
    • Income cut-off:
      • Married filing jointly: $130,000
      • Single, head of household, or qualifying widow(er) $65,000
    • Tuition and fees deduction limit-tier 2 limit: $2,000
    • Income cut-off:
      • Married filing jointly: $160,000
      • Single, head of household, or qualifying widow(er): $80,000

Long-term Care Premiums - 2016

  • Limit on premium allowed as medical expense
    • Age 40 or under: $390
    • Over 40 but not over 50: $730
    • Over 50 but not over 60: $1,460
    • Over 60 but not over 70: $3,900
    • Over 70: $4,870

First-year expensing (Section 179) and Bonus Depreciation

For qualifying property placed in service in 2016, first-year expensing is allowed up to a limit of $500,000. The limit begins to phase out if the total cost of qualifying property exceeds $2,010,000.

Section 179 Deduction Phase-out:

If the cost of qualifying property placed in service in 2016 is more than $2,010,000, you reduce the $500,000 expensing limit dollar-for-dollar for each dollar the cost of qualifying property exceeds $2,010,000 (but not below zero).

For example, if you place machinery in service during 2016 costing $2,100,000, the $500,000 deduction limit is reduced by $90,000 to $410,000.

If the cost of the property was $2,510,000 or more, you could not take the Section 179 deduction because the $500,000 deduction limit would be completely phased out.

Bonus Depreciation:

The bonus depreciation rate for 2016 is 50%. Bonus depreciation is also called a Section 168(k) allowance and a special depreciation allowance.

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