While we don’t know the full impact of every last word of the Congressional budget, we have already been informed of several aspects of tax law that will change in 2016 and many things that will stay the same.
The U.S. economy has minimal inflation at this point (even with the recent Fed corrections). As a result, many figures are going to stay unchanged in 2016:
- Contribution limits to IRA’s
- Contribution limits to 401(k) plans
- Flexible spending regulations
- Health Saving Accounts’ allowable contributions will remain largely the same. People use HSA’s to offset expenses not covered by health insurance plans so that they can pay for these expenses with pre-tax earnings. The individual maximum contribution will remain the same, although the family maximum will increase by $100.
However, some figures are changing. A brief summary:
- The personal federal tax exemption is rising to $4,050, up $50.
- The federal income tax brackets are rising slightly (less than ½%)
- The alternative minimum tax, which catches many income earners in a tax bind is also changing. The new AMT exemption will be $53,900 for single filers or $83,800 for joint filers.
- The federal estate tax exemption is supposed to rise again; this time, the threshold will be $5.45 million for those taxpayers who pass away in 2016.
In addition, there will be some regulatory tax changes. The most notable is the next phase of the Affordable Care Act, which will require employers who employee 51 or more full-time people to offer health insurance with some grandfathering allowances. In addition, the penalty for not having healthcare will be increasing again this year to $695 per person or 2.5% of income.
Knowing the upcoming changes gives everybody time to add some monetary behavior to their upcoming New Year’s Resolutions.