Many federal tax items are indexed annually for inflation, such as the income tax brackets for individuals and trusts, the standard deduction, and the gift and estate tax exemption. The IRS recently announced what the new amounts will be for all 51 of these items in 2016. Given the very low rate of inflation over the last year, the new values will increase only about 0.4% over the 2015 values they will replace. All of these changes are minor and should have little effect on the tax incentives that encourage donors to make charitable gifts.
The following new amounts will be of particular interest to gift planners, except perhaps the last one. For the gory details on all 51 items, see Revenue Procedure 15-53.
- Gift and estate tax exemption - The lifetime gift and estate tax exemption will increase $20,000 to $5,450,000 per person ($10,900,000 for married couples). This same exemption amount will apply to generation skipping tax.
- Annual gift tax exclusion - The annual gift tax exclusion will remain $14,000.
- Pease limitation threshold - The threshold adjusted gross income (AGI) above which itemized deductions, including charitable deductions, will be reduced (the so-called Pease limitation) will increase $1,400 to $311,300 for a married couple filing jointly. This threshold amount will also increase slightly for other filing statuses.
- Standard deduction - The standard deduction for every filing status will be unchanged, except for Heads of Households, where the amount has increased $50 to $9,300.
- Personal exemption – The personal exemption will increase $50 to $4,050.
- Personal exemption phaseout - The threshold AGI at which the personal exemption will start to be phased-out will increase $1,400 to $311,300 for a married couple filing jointly. This threshold amount will also increase slightly for other filing statuses.
- Income tax bracket amounts - The amount at which each federal income tax bracket begins and ends will be slightly higher for trusts and for individuals. See below for the changes in these amounts for a married couple filing jointly.
- (And, in case you were wondering, the tax on arrow shafts will remain $0.49 per arrow.)
Federal Income Tax Schedule for Married Individuals Filing Jointly
|
In 2015 |
In 2016 |
|||||
|
Taxable Income* |
Tax |
% on Excess |
|
Taxable Income* |
Tax |
% on Excess |
|
$0 |
$0 |
10 |
|
$0 |
$0 |
10 |
|
18,450 |
1,845 |
15 |
|
18,550 |
1,855 |
15 |
|
74,900 |
10,312.50 |
25 |
|
75,300 |
10,367.50 |
25 |
|
151,200 |
29,387.50 |
28 |
|
151,900 |
29,517.50 |
28 |
|
230,450 |
51,577.50 |
33 |
|
231,450 |
51,791.50 |
33 |
|
411,500 |
111,324 |
35 |
|
413,350 |
111,818.50 |
35 |
|
464,850 |
129,996.50 |
39.6 |
|
466,950 |
130,578.50 |
39.6 |
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