What comes with a brand new 12 months? Adjustments to the federal tax code, in fact. And 2016 isn’t any exception.
These modifications may imply large monetary penalties if you do not have medical health insurance. Or they might deliver you large financial savings in the event you occur to personal a small enterprise. Total, the modifications to the tax code that Congress enacted final 12 months are useful to shoppers, based on Dave Du, vice chairman of shopper advocacy at TaxAudit.com.
"With simply days to go earlier than the top of the 12 months, Congress lastly prolonged many of the tax breaks which have been set to run out," Du stated. "A few of these provisions — just like the definition of racehorse as property — will not impression too many people, however there’s a lot excellent news for taxpayers this 12 months."
One instance? You possibly can file later this 12 months. The deadline for submitting your earnings taxes this 12 months is April 18 as an alternative of April 15, due to one thing referred to as Emancipation Day in Washington, D.C.
Listed here are 5 different large tax modifications you need to be ready for this 12 months.
1. A Climbing Well being Insurance coverage Penalty
One of many greater modifications to the tax code this 12 months is definitely a punitive one: A rise within the penalty for not having medical health insurance that meets the necessities of the Inexpensive Care Act.
Micah Fraim, a Roanoke, Virginia-based Licensed Public Accountant, stated that for the 2015 tax 12 months — these are the taxes you may be submitting by April 18 — filers should pay a penalty of $325 for each uninsured grownup and $162.50 for each uninsured dependent youngster, or 2% of your taxable earnings — whichever quantity is bigger.
That is a major improve. For the 2014 tax 12 months, these numbers stood at $95 and $47.50, or 1% of your taxable earnings. "And in 2016, it will get even worse," Friedman stated.
For the 2016 tax 12 months — the taxes you’ll file by April of 2017 — the penalty for not having insurance coverage rises to $695 per grownup and $347.50 per youngster, or 2.5% of your earnings. The message is obvious: If you do not have acceptable medical health insurance, it is time to get it. (See additionally: Keep away from These 5 Expensive Well being Insurance coverage Errors)
2. New Well being Insurance coverage Kinds
It’s also possible to anticipate to obtain a brand new type or two within the mail referring to medical health insurance. Should you’ve bought medical health insurance via the federal authorities’s Well being Insurance coverage Market, you may obtain Kind 1095-A. This is not a change — the federal government started mailing this type out for the 2014 tax 12 months.
However there are two new medical health insurance varieties for the 2015 tax 12 months. Kind 1095-B is an announcement out of your medical health insurance firm verifying that you just and different members of your family have insurance coverage protection that meets the necessities of the Inexpensive Care Act. This manner is simply despatched to taxpayers who get their insurance coverage from someplace apart from the Well being Insurance coverage Market, akin to from their employer. Kind 1095-C is an announcement out of your employer that gives particulars about your employer-sponsored well being advantages.
Many taxpayers will obtain each 1095-B and 1095-C, in fact. The important thing truth to comprehend? You most likely will not need to do something with these varieties, stated Andrew Oswalt, Licensed Public Account for Cedar Rapids, Iowa-based TaxACT.
"The brand new varieties could possibly be complicated as a result of most individuals will assume they need to do one thing with them," Oswalt stated. "The fact is, they will merely have to mark a checkbox on their Kind 1040 when submitting and maintain the varieties 1095-B and 1095-C for his or her information."
3. A Tax Break for Small Enterprise Homeowners
Priyanka Prakash, finance specialist at loan-search service FitBiz Loans, stated that small enterprise house owners want to pay attention to Part 179 of the tax code — a brand new tax regulation that lets them deduct as much as $500,000 of qualifying gear on their tax returns.
To qualify for this deduction, the gear should be used primarily for enterprise functions, Prakash stated. The gear should even have been put into use through the 2015 calendar 12 months.
"This covers a variety of kit, from computer systems to furnishings to enterprise autos," Prakash stated.
Prakash provides this instance: If a enterprise purchases workplace gear value $100,000, it will possibly then deduct that whole buy quantity on its taxes. If the enterprise has a tax fee of 30%, Part 179 will reserve it $30,000 in taxes. Beforehand, enterprise house owners may solely deduct a small quantity yearly based mostly on the lifetime of the gear.
"Part 179 saves small companies some huge cash," Prakash stated.
4. A Break for Faculty College students
Tom Wheelwright, a Licensed Public Account and writer of Tax-Free Wealth, stated that the 2015 tax 12 months introduced an necessary break for faculty college students who’re submitting their very own taxes or dad and mom who declare these college students as dependents.
Congress made everlasting the American Alternative Tax Credit score, which supplies school college students a credit score of $2,500 per 12 months for faculty tuition, charges, and course supplies. Mother and father can declare the exemption for his or her college-age college students so long as they declare these college students as dependents on their earnings taxes.
5. A Boon for Heads of Family
The usual deduction is about to rise — a bit — for heads of households. The usual deductions that almost all taxpayers can declare in 2016 have not risen for single taxpayers or married {couples} submitting collectively or individually. Blame that on low inflation.
However the usual deduction for taxpayers submitting as the pinnacle of their households goes up a bit, rising $50 for 2016. That brings that customary deduction as much as $9,300 in 2016.
Are you prepared for tax time this 12 months?
