New Here? Get the Free Newsletter

Oblivious Investor offers a free newsletter providing tips on low-maintenance investing, tax planning, and retirement planning. Join over 16,000 email subscribers:

Articles are published Monday and Friday. You can unsubscribe at any time.

2016 Tax Brackets, Standard Deduction, Personal Exemption, and Other Updates

Every year, I publish a brief update regarding significant tax changes for the following year. For 2016, there’s no big news. But we’re going to do this anyway, because I know many people (myself included!) find it helpful to have a quick reference throughout the year. If you want even more details, the official IRS announcement can be found here.

The tax brackets for 2016 are as follows:

Single 2016 Tax Brackets

Taxable Income
Tax Bracket:
$0-$9,275 10%
$9,276-$37,650 15%
$37,651-$91,150 25%
$91,151-$190,150 28%
$190,151-$413,350 33%
$413,351-$415,050 35%
$415,051+ 39.6%

 

Married Filing Jointly 2016 Tax Brackets

Taxable Income
Tax Bracket:
$0-$18,550 10%
$18,551-$75,300 15%
$75,301-$151,900 25%
$151,901-$231,450 28%
$231,451-$413,350 33%
$413,351-$466,950 35%
$466,951+ 39.6%

 

Head of Household 2016 Tax Brackets

Taxable Income
Tax Bracket:
$0-$13,250 10%
$13,251-$50,400 15%
$50,401-$130,150 25%
$130,151-$210,800 28%
$210,801-$413,350 33%
$413,351-$441,000 35%
$441,001+ 39.6%

 

Married Filing Separately 2016 Tax Brackets

Taxable Income
Marginal Tax Rate:
$0-$9,275 10%
$9,276-$37,650 15%
$37,651-$75,950 25%
$75,951-$115,725 28%
$115,726-$206,675 33%
$206,676-$233,475 35%
$233,476+ 39.6%

 

Standard Deduction Amounts

The 2016 standard deduction amounts will be as follows:

  • Single or married filing separately: $6,300
  • Married filing jointly: $12,600
  • Head of household: $9,300

The additional standard deduction for people who have reached age 65 (or who are blind) is $1,250 for married taxpayers or $1,550 for unmarried taxpayers.

Personal Exemption Amount and Phaseout

The personal exemption amount for 2016 is $4,050.

However, the total personal exemptions to which you’re entitled will be phased out (i.e., reduced and eventually eliminated) as your adjusted gross income (i.e., the last line of the first page of your Form 1040) moves through a certain range.

  • For single taxpayers, personal exemptions begin to be phased out at $259,400 and are fully phased out by $381,900.
  • For married taxpayers filing jointly, personal exemptions begin to be phased out at $311,300 and are fully phased out by $433,800.
  • For taxpayers filing as head of household, personal exemptions begin to be phased out at $285,350 and are fully phased out by $407,850.
  • For married taxpayers filing separately, personal exemptions begin to be phased out at $155,650 and are fully phased out by $216,900.

Limitation on Itemized Deductions

As was the case for the last few years, the amount of itemized deductions which you are allowed to claim is reduced by 3% of the amount by which your adjusted gross income exceeds certain threshold amounts. These threshold amounts are the same as the lower threshold amounts listed above for the personal exemption phaseout (e.g., $259,400 for single taxpayers). However:

  1. Your itemized deductions cannot be reduced by more than 80% as a result of this limitation, and
  2. Your itemized deductions for medical expenses, investment interest expense, casualty/theft losses, and gambling losses are not reduced as a result of this limitation.

IRA and 401(k) Contribution Limits

For 2016, the contribution limit to Roth and traditional IRAs is unchanged at $5,500, with an additional catch-up contribution of $1,000 for people age 50 or older.

The contribution limit for 401(k), 403(b), and most 457 plans is unchanged at $18,000, with an additional catch-up contribution of $6,000 for people age 50 or older.

The maximum possible contribution for defined contribution plans (e.g., for a self-employed person with a sufficiently high income contributing to a SEP IRA) is unchanged at $53,000.

AMT Exemption Amount

After adjusting for inflation, the following are the AMT exemptions for 2016:

  • $53,900 for single taxpayers,
  • $83,800 for married taxpayers filing jointly, and
  • $41,900 for married taxpayers filing separately.

“Shared Responsibility Payment” (Penalty for No Health Insurance)

As with 2015, one of the biggest changes for individual income tax is that the calculation of the penalty for having no health insurance is increasing (according to schedule). Healthcare.gov has the details of the calculation here.

For More Information, See My Related Book:

Book6FrontCoverTiltedBlue

Taxes Made Simple: Income Taxes Explained in 100 Pages or Less

Topics Covered in the Book:
  • The difference between deductions, exemptions, and credits,
  • Itemized deductions vs. the standard deduction,
  • Several money-saving deductions and credits and how to make sure you qualify for them,
  • Click here to see the full list.

A testimonial from a reader on Amazon:

"Very easy to read and is a perfect introduction for learning how to do your own taxes. Mike Piper does an excellent job of demystifying complex tax sections and he presents them in an enjoyable and easy to understand way. Highly recommended!"
Disclaimer: By using this site, you explicitly agree to its Terms of Use and agree not to hold Simple Subjects, LLC or any of its members liable in any way for damages arising from decisions you make based on the information made available on this site. I am not a financial or investment advisor, and the information on this site is for informational and entertainment purposes only and does not constitute financial advice.

Copyright 2017 Simple Subjects, LLC - All rights reserved. To be clear: This means that, aside from small quotations, the material on this site may not be republished elsewhere without my express permission. Terms of Use and Privacy Policy