2016 Tax Law Modifications That Will Affect You This Tax Season

2016 Tax Law Modifications That Will Affect You This Tax Season
Tax laws change every year, but it is important to give great attention to those that affect your refunds and payments. We have highlighted five changes that will affect the majority of taxpayers in the upcoming tax season. To learn more about changes to tax laws that directly affect your household, please contact our office for an appointment.
1- The Affordable Care Act (ACA)
When it comes to the Affordable Care Act the majority of taxpayers will see a minimal impact on their 2016 taxes. If you purchased health insurance via the Health Insurance Marketplace or received the advanced premium tax credit, you will be required to report some additional information on your tax return. For more information visit HealthCareAct.com. This site offers tools to help you understand the impact of ACA at tax time.
2- Adoption Credit
Since 2010 the United States of America has seen a huge increase in the amount of adoptions by single
and married households. As an adoptive parent you may qualify for a credit of up to $13,460 of your adoption expenses. If your employer provided adoption assistance benefits, you may be able to exclude the same amount from your income. Credit and exclusions may be claimed for the same adoption, but not for the same expense. This credit has become permanent and indexed to inflation.
3- Social Security wage ceiling
The wage ceiling for Social Security tax has increased from $117,000 in 2015 to $118,500 in 2016. Once
an individual reaches this taxable amount with an employer, Social Security taxes should stop being withheld from your pay until the following year. If you have more than one employer and your total earnings are more than the maximum taxable amount, this rule still applies. This means that you may receive credit for the amount withheld on amounts exceeding $118,500.
4- Limitation on itemized deductions
Taxpayers with a high adjusted gross income will be affected by changes to the Pease provision this coming tax season. The Pease Provision was created to serve as surtax on incomes above a certain threshold. If you have a high adjusted gross income, the amount of personal itemized exemptions you can take for yourself, spouse, or eligible dependents have decreased. These changes are highlighted below.
Itemized deductions start to phase out when income reaches $155,650 if you are married filing separately ($259,400 for single individuals, $285,350 if head of household, or $311,300 if filing jointly).
 Itemized deductions have been reduced by 3% of you r adjusted gross income over these amounts, but they are never reduced by more than 80% of your otherwise allowable deductions.
5- Earned Income Credit
It is important for taxpayers to know the law when it comes to Earned Income Credit so that you are not misled. Many taxpayers without children are unaware that they to o can receive an Earned Income Credit up to $506. For families with two children, the maximum amount is $5572, with one child it is $3373. Families with three or more qualifying children can receive a maximum credit up to $6269 for 2016, which is up $27 from 2015.

Written by Desnoyers CPA

Desnoyers CPA

Known for her friendly, outgoing nature and her rare talent for financial foresight, Lydia Desnoyers has been serving individuals and small businesses in Florida since 2010. After earning her Master’s Degree in Accounting from Nova Southeastern University and her Bachelor’s Degree in Accounting from Florida State University, she became a Certified Public Accountant and a Certified Fraud Examiner.

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