Fall Brings Significant Changes to Federal Tax Law

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Every year, as the leaves begin to fall, we see key changes to federal tax law, changes to which all individuals and businesses should be aware. This year is no different, and some of these changes are significant.

Starting in healthcare, the Affordable Care Act (ACA), despite becoming law six years ago, continues to bring with it challenges to which people need to adjust and adapt. All companies with at least 50 full-time equivalent employees must offer health coverage, and beginning this year, the fines for not providing coverage have increased.

Companies who fail to provide coverage now have to pay $2,160 per employee over 30 employees, which can add up to significant losses. Companies which provide coverage deemed unaffordable must now pay $3,240 for each full-time employee receiving a tax credit for buying coverage on one of the health care exchanges.

On the individual side, people without health insurance now must pay $695 per adult and $347.50 per child, with a ceiling of $2,085 – this could be a significant increase to many people. Additionally, income levels to qualify for health premium tax credits have increased from $11,770 to $47,080 for singles and $24,250 to $97,000 for a family of four. All of these are changes of which people should be aware.

On the tax side, not only have all tax brackets been slightly widened, but standard and itemized deductions have risen. Standard deductions are now up to $6,300 for those filing single, $9,300 for head of household filers and $12,600 for married couples filing jointly. With itemized deductions, available write-offs have risen to 3% of excess of Adjusted Gross Income (AGI) for $249,400 for those filing single, $285,350 for head of household filers and $311,300 for married couples filing jointly. What’s more, personal exemption amounts have increased to $4,050.

Other important changes include:

  • The 20% top rate on qualified dividends and long-term capital gain now starts at higher rate-$415,050 for single filers, $441,000 for head of household filers and $466,950 for married couples filing jointly.
  • The annual cap on deductible Health Savings Accounts (HSA) contributions has risen to $3,350 for self only and $6,750 for families.
  • Deduction limits on long-term care premiums have increased to $390 per person for 40 years old and younger, $730 per person for 41 to 50 years old, $1,460 per person for 51 to 60 years old, $3,900 per person for 61 to 70 years old and $4,870 per person who are 71 and older.
  • Foreign earned income exclusion has risen to $101,300.
  • Employer provided tax-free parking has risen to $255 a month, and mass transit passes and commuter vans now match that.
  • 2016 Standard Mileage Rate has decreased to 54 cents a mile.

All of these are changes have the potential, to varying degrees, to affect the bottom line of both businesses and individuals. The key is to be aware and start to make the necessary adjustments now. As always in both business and personal finance, those who plan ahead and keep up with the many changes in federal tax law will benefit much more than those who do not.

Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statutes, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.

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