Tax Season Reference Guide Tool for preparing tax returns
Quick Reference Guide A tool for preparing returns At the close of every year, NATP s Tax Knowledge Center pulls together a list of common facts and figures based on current law that tax professionals can reference throughout the coming tax season. You ll find this Quick Reference Guide useful as you prepare returns. 179 Expensing For, taxpayers may expense up to $510,000 of qualifying property acquired for use in a trade or business. The deduction phase-out begins at $2,030,000 on purchases of qualifying property. Qualified real property permanently qualifies as 179 property and, after 2015, is no longer limited to $250,000. In addition, air conditioning and heating units placed in service after 2015 are eligible 179 property. The SUV limit remains at $25,000. For, the aggregate amount taxpayers may expense increases to $520,000. However, the deduction is reduced when the cost of qualifying property exceeds $2,070,000. Adoption The maximum nonrefundable credit increases to $13,570 for. The credit begins to phase out when MAGI exceeds $203,540 and completely phases out when MAGI reaches $243,540. The maximum credit is $13,840 for. The credit begins to phase out when MAGI exceeds $207,580 and is completely phased out when MAGI reaches $247,580. Alternative Minimum Tax (AMT) For, the AMT exemption amounts are as follows: Filing Status Exemption Phaseout MFJ, QW $84,500 $160,900 $498,900 S, HH $54,300 $120,700 $337,900 MFS $42,250 $80,450 $249,450 For a child subject to kiddie tax Estates and Trusts $7,500 plus child s earned income not to exceed $54,300 $120,700 $337,900 $24,100 $80,450 $176,850 Alternative Minimum Tax (AMT), cont. For, the AMT exemption amounts are as follows: Filing Status Exemption Phaseout MFJ, QW $86,200 $164,100 $508,900 S, HH $55,400 $123,100 $344,700 MFS $43,100 $82,050 $254,450 For a child subject to kiddie tax Estates and Trusts $7,650 plus child s earned income not to exceed $55,400 $123,100 $344,700 $24,600 $82,050 $180,450 Annual Gift Tax Exclusion and Exemption For tax years 2014, the annual gift tax exclusion is $14,000 to each person. For, it increases to $15,000 per person. The annual exclusion to a spouse who is not a citizen of the United States is $149,000. This annual exclusion increases to $152,000 for tax year. The gift tax exemption amount is $5,490,000 for and $5,600,000 for. Capital Gains Rates The top tax rate for capital gains is permanently set at 20% for taxpayers with taxable income in the highest tax bracket. The net investment income tax (NIIT) of 3.8% makes the overall capital gain rate for higher income taxpayers effectively 23.8%. The highest tax bracket is 39.6%. The 0% rate will continue to apply to capital gains to the extent ordinary income is taxed at a rate below the 25% rate. For individuals subject to a 25% or higher rate but still below the highest tax bracket, capital gains are taxed at the 15% rate.
The ordinary income tax rates for short-term capital gain, the unrecaptured 1250 rate of 25% and the collectible rate of 28% continue to apply. Child and Dependent Care The minimum child and dependent care credit is 20% and the maximum is 35% based on AGI. The amount of eligible expenses is $3,000 for one child and $6,000 for two or more children. Child Tax The maximum child tax credit is $1,000 for each qualify ing child. The refundable child tax credit is limited to the greater of: 15% of earned income above $3,000; or The excess of the taxpayer s social security taxes for the year over the earned income credit for the year for taxpayers with three or more qualifying children. Filing Status Phaseout MAGI MFJ $110,000 S, HH, QW $75,000 MFS $55,000 Day Care Per Diem for Meals The standard meal and snack rates allowed for day care facilities are equal to the Tier 1 reimbursement rates established by the Child and Adult Care Food Program (CACFP) of the Department of Agriculture. The Department of Agriculture changes the rates every July; therefore, the IRS uses the rates in effect as of December 31 of the prior year for the entire year (for example, December 31, 2016, rates apply for all of ), even though the CACFP rates change in July (http://www.fns.usda.gov/cacfp/reimbursement-rates). The taxpayer is required to keep a log for the number of meals and snacks served to each child. The rate represents the amount allowed as a deduction per child for the corresponding type of meal served. Meal Contiguous States Alaska Hawaii Breakfast $1.31 $2.09 $1.53 Lunch and Supper $2.46 $3.99 $2.88 Snack $0.73 $1.19 $0.86 Meal Contiguous States Alaska Hawaii Breakfast $1.31 $2.09 $1.52 Lunch and Supper $2.46 $3.99 $2.88 Snack $0.73 $1.19 $0.85 Dividend Rates The top tax rate for qualified dividends is permanently set at 20% for taxpayers with taxable income in the highest tax bracket. For, the highest tax bracket is 39.6%. The 0% rate will continue to apply to dividends to the extent ordinary income is taxed at a rate below the 25% rate. For individuals subject to a 25% or higher rate but still below the high-income threshold, qualified dividends are taxed at the 15% rate. Earned Income Tax The maximum amount of income a taxpayer can earn and still be eligible for the earned income tax credit increased. If earned income or AGI exceeds the following amounts, the earned income tax credit is zero. Earned Income Tax Taxpayer MFJ Other Than MFJ Max. With one child $45,207 $39,617 $3,400 With two children $50,597 $45,007 $5,616 With three or more children $53,930 $48,340 $6,318 With no children $20,600 $15,010 $510 Earned Income Tax Taxpayer MFJ Other Than MFJ Max. With one child $46,102 $40,402 $3,468 With two children $51,598 $45,898 $5,728 With three or more children $54,998 $49,298 $6,444 With no children $21,000 $15,310 $520
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The maximum amount of investment income a taxpayer may have and still be eligible for the credit is $3,450 for and $3,500 for. Education s Maximum Lifetime Learning $2,000 Hope N/A American Opportunity Tax $2,500 Maximum Lifetime Learning $2,000 Hope N/A American Opportunity Tax $2,500 The maximum lifetime learning credit is the lesser of 20% of the first $10,000 of qualified higher education expenses or $2,000. The maximum American opportunity tax credit is 100% of the first $2,000 of qualified higher education tuition and related expenses, plus 25% of the next $2,000 of such expenses paid during the tax year, equaling a maximum credit of $2,500. Filing Status Phaseout American Opportunity Tax Lifetime Learning MFJ, QW $160,000 $180,000 $112,000 $132,000 S, HH $80,000 $90,000 $56,000 $66,000 MFS Not Available Not Available Filing Status Phaseout American Opportunity Tax Lifetime Learning MFJ, QW $160,000 $180,000 $114,000 $134,000 S, HH $80,000 $90,000 $57,000 $67,000 MFS Not Available Not Available Educator Expense Deduction An eligible educator can take an above-the-line deduction for out-of-pocket classroom-related expenses. For 2016, the deduction may not exceed $250. Personal Exemption Amount The personal exemption is $4,050 for and $4,150 for. Personal Exemption Phaseout Filing Status AGI AGI MFJ, QW $313,800 $436,300 $320,000 $442,500 HH $287,650 $410,150 $293,350 $415,850 S $261,500 $384,000 $266,700 $389,200 MFS $156,900 $218,150 $160,000 $221,250 Foreign Earned Income Exclusion For, a qualified individual may exclude up to $102,100 of qualified foreign earned income using Form 2555, Foreign Earned Income. For, the indexed amount increases to $104,100. Health Savings Accounts (HSAs) Like IRAs, funds in HSAs are 100% tax-deferred until distributed. A non-dependent taxpayer insured by a high deductible health plan (HDHP) may deduct monthly HSA contributions up to an annual limit. Coverage Individual Family Individual Family Annual Contribution Limit HDHP Minimum Deductible HDHP Maximum Out of Pocket $3,400 $1,300 $6,550 $6,750 $2,600 $13,100 $3,450 $1,350 $6,650 $6,900 $2,700 $13,300 If the HSA account beneficiary is age 55 or older at the end of the year, the annual contribution limit is increased by $1,000 [ 223(b)(3)]. If a husband and wife are both age 55 or over and eligible individuals, they can each contribute an additional $1,000 to his or her own HSA (Notice 2008-59, Q&A #22). In other words, if they both want to take advantage of the additional $1,000, each must have their own HSA in which to contribute.
IRA: MAGI Phaseout for Roth IRA Contributions Filing Status MFJ $186,000 $196,000 $189,000 $199,000 MFS (lived with spouse) S, HH, QW, or MFS* $0 $10,000 $0 $10,000 $118,000 $133,000 $120,000 $135,000 *If a taxpayer is filing MFS and did not live with his/her spouse at any time during the year, he/she is considered Single for IRA deduction purposes. IRA: Contribution Limit to Traditional and Roth IRAs For 2013, the contribution limit to a traditional or Roth IRA is $5,500 ($6,500 for taxpayers age 50 and over). IRA: Deduction Phaseout for Traditional IRAs for Filing Status Taxpayer Covered by Employer Plan S, HH $62,000 $72,000 MFJ, QW $99,000 $119,000 MFS* $0 $10,000 Filing Status Spouse of Covered Employee S, HH N/A MFJ $186,000 $196,000 MFS $0 IRA: Deduction Phaseout for Traditional IRAs for Filing Status Taxpayer Covered by Employer Plan S, HH $63,000 $73,000 MFJ, QW $101,000 $121,000 MFS* $0 $10,000 Filing Status Spouse of Covered Employee S, HH N/A MFJ $189,000 $199,000 MFS $0 Itemized Deductions The Pease Limitation applies to reduce certain otherwise allowable itemized deductions for taxpayers with AGI exceeding an applicable threshold. Filing Status MFJ/QW $313,800 $320,000 HH $287,650 $293,350 S $261,500 $266,700 MFS $156,900 $160,000 Kiddie Tax For 2015, kiddie tax applies to children with unearned income greater than $2,100 if: The child is under age 18; or Has earned income that does not exceed one half of his or her support and is either (1) age 18; or (2) a full-time student age 19 23; Has at least one living parent; and Is required to file, but does not file a tax return for the year. Long-Term Care Premiums Annual Deductible Limit Taxpayer s Age at the Close of the Tax Year 40 or less $410 $420 More than 40, but not more than 50 $770 $780 More than 50, but not more than 60 $1,530 $1,560 More than 60, but not more than 70 $4,090 $4,160 More than 70 $5,110 $5,200
Luxury Automobile Depreciation Limits for Year Automobiles Trucks & Vans 1st year $3,160 $3,560 1st year with 50% bonus depreciation $11,160 $11,560 2nd year $5,100 $5,700 3rd year $3,050 $3,450 Succeeding years $1,875 $2,075 Additional Medicare Tax An additional Medicare tax of 0.9% applies to an individual s wages, Railroad Retirement Tax Act compensation, and self-employment income if such compensation exceeds the following threshold amount: $250,000 for MFJ. $125,000 for MFS. $200,000 for all others (QW, HH, S). Medical Expense Deduction After 2016, the deduction for medical expenses on Schedule A, Itemized Deductions, is subject to a 10%-of-AGI limitation for all taxpayers regardless of age. (Archer) Medical Savings Accounts Health Plan Annual Deductible Maximum Out-of-Pocket Expenses Annual Maximum Deduction* Individual $2,250 $3,350 $4,500 65% of deductible Family $4,500 $6,750 $8,250 75% of deductible Individual $2,300 $3,450 $4,600 65% of deductible Family $4,600 $6,850 $8,400 75% of deductible *If the plan is established by a self-employed individual, the limit is the lesser of the related trade or business earned income or the applicable percentage. Net Investment Income Tax A 3.8% Medicare tax is applied against net investment income (NII) of individuals, estates and trusts. For this purpose, individual means any natural person, except those who are nonresident aliens. As such, the net investment income tax (NIIT) applies only to citizens or residents of the U.S. The NIIT, also referred to as the unearned income Medicare contribution (UIMC) tax, is 3.8% of the lesser of: Net investment income for the year. The excess of modified adjusted gross income (MAGI) over the threshold amount of $250,000 for MFJ and QW; $125,000 for MFS; and $200,000 for HH and S. Estates and trusts do not have any threshold as defined in 1411. They pay tax on the lesser of undistributed net investment income or the amount of AGI that exceeds the highest tax bracket of $12,500 for and $12,700 for. Per Diem Meal Allowance for Transportation Industry Type of Travel 2016 Travel inside the United States Travel outside the United States $63 $63 $68 $68
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Per Diem Allowance Substantiation Method Standard Rate* M&IE Lodging Total October 1, 2016 September 30, October 1, September 30, $51 $91 $142 $51 $93 $144 *See gsa.gov for rates for specific cities. The incidentals allowance is $5 for travel both inside and outside the United States. Health Flexible Spending Arrangement (FSA) Voluntary employee salary reduction contributions to a health FSA cannot exceed $2,600 for. This amount increases to $2,650 for. Refundable : Qualified Health Plan The limitation on tax imposed under 36B(f)(2)(B) for excess advanced credit payments is determined using the following table: If household income (expressed as a percent of the poverty line) is: Limitation amount for unmarried individuals (QW and HH) is: Limitation amount for all other taxpayers is: Less than 200% $300 $600 At least 200%, but less than 300% At least 300%, but less than 400% If household income (expressed as a percent of the poverty line) is: $750 $1,500 $1,275 $2,550 Limitation amount for unmarried individuals (QW and HH) is: Limitation amount for all other taxpayers is: Less than 200% $300 $600 At least 200%, but less than 300% At least 300%, but less than 400% $775 $1,550 $1,300 $2,600 Saver s A saver s credit can be claimed using Form 8880, for Qualified Retirement Savings Contributions. The credit is calculated by multiplying the applicable rate by the qualified retirement plan contributions not to exceed $2,000. The maximum credit is $1,000 per person. Filing Status 50% 20% 10% MFJ $0 $37,000 $37,001 $40,000 HH $0 $27,750 $27,751 $30,000 All others $0 $18,500 $18,501 $20,000 Filing Status $40,001 $62,000 $30,001 $46,500 $20,001 $31,000 50% 20% 10% MFJ $0 $38,000 $38,001 $41,000 HH $0 $28,500 $28,501 $30,750 All others $0 $19,000 $19,001 $20,500 $41,001 $63,000 $30,751 $47,250 $20,501 $31,500 No $62,000 $46,500 $31,000 No $63,001 $47,251 $31,501 Self-Employment Optional Methods In, the following dollar limits apply: Under the farm optional method, if the individual s gross farm income is $7,800 ($7,920 for ) or less, or net farm income is less than $5,630.75 ($5,717.38 for ), net earnings from selfemployment equal the smaller of two-thirds of gross farm income (not less than zero) or $5,200 ($5,280 for ). The individual can use this method year after year. There is no limit on the number of years a taxpayer can use this method. Under the nonfarm optional method, if net nonfarm profits are less than $5,630.75 ($5,717.38 for ), and less than 72.189% of gross nonfarm income, and net earnings from self-employment were at least $400 in two of the prior three years, net earnings from self-employment equal the smaller of two-thirds of gross nonfarm income (not less than zero) or $5,200 ($5,280 for ). There is a five-year lifetime limit on the use of the nonfarm optional method. However, the five years do not have to be consecutive.
For, the maximum wages subject to social security tax is $127,200. For, the maximum wage amount increases to $128,400. Standard Deduction The basic standard deduction is: Filing Status Standard Mileage Rates Business mileage 53.5 54.5 Medical and moving mileage 17 18 Charity 14 14 Depreciation component 25 25 MFJ/QW $12,700 $13,000 HH $9,350 $9,550 S $6,350 $6,500 MFS $6,350 $6,500 Additional Deduction for Age or Blindness Married or Surviving Spouse $1,250 $1,300 S or HH $1,550 $1,600 In tax year 2015, the standard deduction for dependents who only have unearned income is $1,050. If the dependent has both earned and unearned income, the standard deduction is the greater of: $1,050; or The dependent s earned income plus $350, but not more than the basic standard deduction for his or her filing status. Standard Mileage Rates Threshold for Tax Rates Capital Gain Rates 0% 15% 20% Filing Status 10% 15% 25% 28% 33% 35% 39.6% S $0 $9,326 $37,951 $91,901 $191,651 $416,701 $418,401 MFJ, QW $0 $18,651 $75,901 $153,101 $233,351 $416,701 $470,701 MFS $0 $9,326 $37,951 $76,551 $116,676 $208,351 $235,351 HH $0 $13,351 $50,801 $131,201 $212,501 $416,701 $444,551 Trusts and Estates N/A $0 $2,551 $6,001 $9,151 N/A $12,501 Threshold for Tax Rates Capital Gain Rates 0% 15% 20% Filing Status 10% 15% 25% 28% 33% 35% 39.6% S $0 $9,526 $38,701 $93,701 $195,451 $424,951 $426,701 MFJ, QW $0 $19,051 $77,401 $156,151 $237,951 $424,951 $480,051 MFS $0 $9,526 $38,701 $78,076 $118,976 $212,476 $240,026 HH $0 $13,601 $51,851 $133,851 $216,701 $424,951 $453,351 Trusts and Estates N/A $0 $2, 601 $6,101 $9,301 N/A $12,701