you done your taxes yet? Your W-2s or 1099s probably
have started to trickle in with the mail over the past
few weeks. You might also be in the process of gathering
the right receipts and pertinent statements.
you sign an IRS tax return and send it off, though, make
sure you know about these new or improved tax breaks for
this yearís tax season. By taking advantage of these
tax breaks, you can reduce your total tax debt.
IRA ROLLOVER SELF-CERTIFICATION
heart if you missed the 60-day time limit for
transferring distributed funds from your IRA or
workplace retirement fund to another qualifying fund.
Thanks to a new rule, you might qualify for a waiver
that will prevent you from having to pay early
to Aug. 24, 2016, those who missed the deadline had to
write a letter to the IRS requesting a waiver. But now,
a new IRS self-certification process lets you receive a
waiver for 11 specific reasons if you missed the 60-day
deadline. Some examples of these 11 reasons are:
illness or death in your family
lost and uncashed check
damage to your home
make things easy on the taxpayer, the IRS website has a
sample letter that you can fill in and print to explain
which of the 11 reasons applies to you. Look for Revenue
GIFT TAX EXCLUSION FOR ABLE ACCOUNTS
ABLE account ó achieving a better life experience ó
offers tax-advantaged opportunities for disabled people
and their families. It helps them save for and pay for
expenses related to the disability. Although the
legislation was passed in 2014, the specialized accounts
only became available on a general basis in 2016.
ó including a family member or friend of a disabled
person ó can contribute up to $14,000 to an ABLE
account without having to pay a gift tax. Earnings and
distributions are tax-free when used to pay for
qualified disability expenses such as:
training and support
accounts offer both state and federal tax advantages. In
addition, the first $100,000 in an ABLE account does not
count as income or assets when disabled individuals try
to qualify for public assistance programs.
only nine states currently have ABLE programs, you can
open an account ó or contribute to one ó in a state
other than your own.
HIGHER TAX THRESHOLDS
positive effect of getting a cost-of-living increase or
raise at your job can be a mixed blessing if it lifts
you into a higher tax bracket. Fortunately, the IRS
raised the tax thresholds for 2016, meaning youíre
less likely to have to pay a greater percentage of your
wages toward taxes if you earned more last year than you
did in 2015.
couples filing jointly slid up from a 15 percent tax
bracket to 25 percent once they earned more than $74,900
in household income in 2015. In 2016, such filers had to
earn more than $75,300 before moving into the 25 percent
INCREASE OF STANDARD DEDUCTION FOR HEAD OF HOUSEHOLD
filing as head of household in 2016 will enjoy a $50
increase in their standard deduction, from $9,250 in
2015 to $9,300 in 2016.
standard deduction didnít increase for other filers.
Singles still receive a $6,300 standard deduction and
married couples filing jointly receive a $12,600
can get a larger standard deduction if you are blind,
age 65 or older, or both. Depending on your
circumstances, the increase can be as much as $1,550.
your standard deduction on line 40 of Form 1040.
Instructions in the left-hand column of your tax return
help you figure out how much you can claim.
INCREASE OF PERSONAL EXEMPTION
42 of Form 1040 lets you claim personal exemptions,
which are amounts you can deduct from your adjusted
gross income for yourself and your dependents. Such
exemptions are in addition to your itemized deductions
or standard deduction.
2016, the per-person exemption rose $50 to $4,050 per
person. Note that a person can only be claimed as an
exemption on one tax return. So, let any of your working
dependents know that they cannot take themselves as an
exemption even if they earn enough money to file their
own tax return.
exemption phases out once you reach certain income
levels. Your exemptions decrease by 2 percent for each
$2,500 above these income levels.
INCREASED EARNED INCOME CREDIT
you have low or moderate income, you might qualify for
the federal earned income credit. The income-based
credit is for single, head of household, married filing
jointly or widowed taxpayers with or without children.
maximum credit for 2016 is $6,269 for filers with three
or more qualifying children. The amount reflects a $27
increase from 2015ís figure of $6,242.
people without children receive the lowest credit.
Single, head of household or widowed taxpayers receive a
maximum credit of $506 if they make less than $14,880.
Those who are married filing jointly receive the same
amount provided their income is less than $20,430. The
credit amount reflects a $3 increase from the 2015
credit of $503. Income limits have increased $60 for
singles and $100 for those in the "married filing
advantage of the earned income credit by filling out
Schedule EIC and attaching it to your tax return if you
have a qualifying child and meet the income requirement.
Then, enter the amount of your credit on line 66a of
Form 1040. If you donít have a qualifying child but
meet the income requirements, simply enter your credit
amount on line 66a.
FOREIGN EARNED INCOME EXCLUSION
you live and work overseas, you can exclude a portion of
your income and foreign housing expenses from gross
income on your U.S. tax return. To claim the exclusion
to income you earned in a foreign country, you must meet
one of the following:
have been physically out of the U.S. for at least 330
full days during any 12-month period.
have been "a bona fide resident of a foreign
country or countries for an uninterrupted period that
includes an entire tax year," according to the IRS.
have been a U.S. resident alien who is a "citizen
or national of a country with which the United States
has an income tax treaty in effect," according to
the IRS. In addition, you must meet the second
you qualify for the exclusion, you can exclude up to
$101,300 of income earned in a foreign country, $500
more income than 2015ís $100,800 tax exclusion.
claim the exclusion, you must file a U.S. income tax
return even if the money you made was less than the
$101,300 exclusion. Fill out Form 2555 or 2555-EZ.