What are two words that most people generally do not want to hear in the same sentence? We nominate "taxes" and "surprise." Generally, surprises on taxes do not go your way — especially when they pertain to tax laws.
Here are some of the most generally applicable changes pertaining to tax law for 2016. Do not let them catch you by surprise.
- ACA Penalties – The penalty for not having health insurance under the Affordable Care Act (ACA) increases to the point where it has some teeth. If you do not have health care coverage in 2015, you will pay the greater of 2% of your annual income above the threshold for filing taxes (approximately $10,150) or $695 per adult in the household, plus half that amount for each child.
In the first case, the maximum penalty will be up to the national average premium associated with a Bronze Plan from the federal exchange. In the second case, the maximum penalty is $2,085.
- Phaseouts – While retirement contribution limits did not change, several phaseout limits did go up. The adjusted gross income (AGI) phaseout limit for contributions to a Roth IRA rose $1,000 to a range of $184,000 to $194,000 for the married filing jointly and $117,000 to $132,000 for individuals. The AGI limit for the Retirement Savings Credit also rose slightly, to $61,500 for married filing jointly and $30,750 for individuals.
Personal Exemption Phaseouts (PEP) and Pease exemptions for itemized deductions also increased. Income thresholds for both are $259,400 for singles and $311,300 for the married filing jointly. Personal exemptions phase out completely at $381,900 for single filers and $433,800 for married filing jointly.
- Filing Deadlines – Some important filing deadlines have changed for forms that are more complex. Partnerships and S corporations must now file returns by the 15th of the third month after the end of the tax year (thus March 15th for those on calendar years). C corporations go the other direction and are now deferred until April 15th.