David Lerner Associates: Tax Changes for 2016
Every year we’re faced with new federal tax codes, and 2016 is no different. This year’s changes could mean penalties if you don't have health insurance, or they could bring you welcomed savings if you happen to own a small business.
Some of these provisions — like the definition of racehorse as property — won't impact too many of us, but there's much good news for taxpayers this year. For example, the deadline for filing your income taxes this year is April 18 instead of April 15, thanks to something called Emancipation Day in Washington, D.C.
Here are the major points of interest for this year:
1. Health insurance penalty
Possibly the biggest change to the tax code this year is an increase in penalty for not having health insurance that meets the requirements of the Affordable Care Act.
The increase is significant. For the 2015 tax year, the penalties are $325 for every uninsured adult, and $162.50 for every dependent child, or 2% of your taxable income, whichever number is greater.
For the 2016 tax year, those penalties rise to $695 per adult and $347.50 per child or 2.5% of your income.
2. Small business tax breaks
Section 179 of the tax code allows for up to $500,000 deductions on qualifying equipment. In other words, equipment that is primarily used for business purposes and must have been put to use during the 2015 calendar year.
This means that small business can save a lot of tax money with this new tax code.
3. Breaks for college students
The American Opportunity Tax Credit gives college students a credit of $2,500 per year for college tuition, fees, and course materials. Parents can claim the exemption for their college-age students as long as they claim these students as dependents on their income taxes.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.
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