Did you know that your tax benefits change with inflation? I didn’t, but I admit, I hadn’t put much thought into it.
The IRS recently released the full list of changes for 2016, and you can read the full list at Revenue Procedure 2015-53. Here are some highlights that I found interesting and useful. Please note, these are for 2016 tax returns (so the filing you will do in 2017).
If you file as head of household, your standard deduction has increased by $50 to $9300. Not a huge increase, but it might be enough to make it worthwhile to take the standard deduction instead of itemizing. For the rest of us, no changes.
The personal exemption also rises $50 to $4050. This is subject to a phase out beginning with incomes of $259,400 (or $311,300 for married couples filing jointly).
The Alternative Minimum Tax exemption amount rises $300 to $53,900, and begins to phase out at $119,700 ($83,800 and $159,700 respectively for married couples).
The maximum Earned Income Credit rises $27 to $6269. This applies to couples filing jointly who have three or more qualifying children.
The monthly limitation for the transportation fringe benefit stays the same at $130, but parking rises to $255. It’s only a $5 increase, but it’s better than nothing.
The adjusted gross income amount for joint files to determine the reduction in the Lifetime Learning Credit rises $1000 to $111,000.
If you work (or invest) overseas, the foreign earned income exclusion rises $500 to $101,300.
And if you make a bit more money, the limitation for itemized deductions will begin with incomes of $259,400 or more ($311,300 for married couples filing jointly).
So what’s the best way to keep abreast of all of these changes? One easy way is obviously to follow personal finance blogs. But the best advice is always to read through all of your tax forms when you sit down to fill them out. Make sure you know the rules and are getting the maximum credits on your tax returns.
As much as I love personal finance, I do not love paperwork, so I use a program to fill out my tax returns every year. My program of choice is TurboTax, but there is a lot of great software out there as well as a number of great free options. Do your research and make the best choice for you.
And don’t wait til the last minute. It’s never a good idea.