Wolters Kluwer Tax & Accounting US is offering its predictions for the estimated ranges for each 2016 tax bracket, based on the inflation data released this week by the U.S. Department of Labor.
The company noted since the late 1980s, the U.S. Tax Code has required that federal income tax brackets be adjusted for inflation annually, and inflation adjustments have been inserted into the Internal Revenue Code in recent years with increasing frequency. The Tax Code now requires more than 50 other inflation-driven computations to determine deduction, exemption and exclusion amounts, in addition to the 40 separate computations needed to inflation-adjust the tax bracket tables each year.
Projections based on the Labor Department’s inflation figures for the 12-month period between Aug. 31, 2014, and Aug. 31, 2015 suggest most taxpayers will experience modest savings, compared to 2015 tax filings. For example, because of the income ranges bracketing the marginal tax rates have increased, a single filer with taxable income of $50,000 should owe $22.50 less next year due to the adjustments to the income tax rate brackets between 2015 and 2016.
A married couple filing jointly with a total taxable income of $100,000 should pay $45 less income taxes in 2016 than they will on the same income for 2015 because of indexing of their tax bracket for 2016, according to Wolters Kluwer.
The dependent standard deduction, used on the returns of individuals claimed as dependents on another taxpayer’s tax return, should remain $1,050 for 2016, according to the company’s estimates.
The additional standard deduction for those 65-years-old and older or who are blind should remain $1,250 for 2016, as will the $1,550 additional amount for single aged 65 or older or blind filers, Wolters Kluwer predicts.
The company cautioned that its projections for indexed amounts are based on the relevant inflation data released by the U.S. Department of Labor. The IRS usually releases official numbers by December each year. However, the tax bracket projections are provided for illustrative purposes only, and should not be used for income tax returns or other federal income tax related purposes until confirmed by the IRS later this year. Thomson Reuters and Bloomberg BNA released their projections on Wednesday (see
Inflation-adjusted Tax Increase Estimates
Wolters Kluwer anticipates the personal exemption amount should be bumped up by inflation by $50, to $4,050 for 2016, up from $4,000 in 2015.
The standard deduction for single, married filing jointly, and married filing separately filers is expected to remain the same for 2016. The standard deduction for heads of household is expected to rise from $9,250 for 2015 to $9,300 for 2016. Any increase in the standard deduction, of course, can produce lower taxes by decreasing the taxpayer’s taxable income.
Wolters Kluwer Tax & Accounting US projects the following for 2016 alternative minimum tax exemptions:
• For married joint filers and surviving spouses, the exemption will be adjusted upward to $83,800, up from $83,400 for 2015.
• For unmarried single filers and heads of households, the 2016 exemption will be $53,900, up from $53,600 for 2015.
• For married single filers, the exemption will increase to $41,900, up from $41,700 in 2015.
2016 represents the third year that the 39.6-percent tax bracket for higher-income taxpayers, enacted by the American Taxpayer Relief Act of 2012 (ATRA), will be imposed. For 2016, Wolters Kluwer projects that the minimum income amounts at which this top tax rate will kick in will rise to $466,950 (from $464,850) for married joint filers; $441,000 (from $439,000) for heads of households; $415,050 (from $413,200) for unmarried filers; and $233,475 (from $232,425) for married separate filers.
These inflation-adjusted amounts will also trigger a 20-percent tax on that portion of taxable income attributable to net capital gains and qualified dividends that exceed these bracket amounts.
The estate and gift tax applicable exemption was first set at a $5 million level back in 2011. The amount has been adjusted for inflation by Congress and is now projected at $5,450,000 for 2016. A spousal portability election can now effectively protect double that amount against estate and gift tax ($10,900,000 for 2016).
Wolters Kluwer predicts the 2016 foreign earned income exclusion will increase to $101,300 for 2016, up from $100,800 for 2015. In addition, it expects the income phaseout range for married joint filers making Roth IRA contributions will be $184,000 to $194,000 for 2016, an increase from $183,000 and $193,000 for 2015.
Married Filing Jointly (& Surviving Spouse)
Tax Rate | 2016 Taxable Income | 2015 Taxable Income |
10% | $0 – $18,550 | $0 – $18,450 |
15% | $18,551 – $75,300 | $18,451 – $74,900 |
25% | $75,301 – $151,900 | $74,901 – $151,200 |
28% | $151,901 – $231,450 | $151,201 – $230,450 |
33% | $231,451 – $413,350 | $230,451 – $411,500 |
35% | $413,351 – $466,950 | $411,501 – $464,850 |
39.6% | $466,951+ | $464,851+ |
Unmarried Individuals (Other Than Surviving Spouses and Heads of Households)
Tax Rate | 2016 Taxable Income | 2015 Taxable Income |
10% | $0 – $9,275 | $0 – $9,225 |
15% | $9,276 – $37,650 | $9,226 – $37,450 |
25% | $37,651 – $91,150 | $37,451 – $90,750 |
28% | $91,151 – $190,150 | $90,751 – $189,300 |
33% | $190,151 – $413,350 | $189,301 – $411,500 |
35% | $413,351 – $415,050 | $411,501 – $413,200 |
39.6% | $415,051+ | $413,201+ |
Head of Household
Tax Rate | 2016 Taxable Income | 2015 Taxable Income |
10% | $0 – $13,250 | $0 – $13,150 |
15% | $13,251 – $50,400 | $13,151 – $50,200 |
25% | $50,401 – $130,150 | $50,201 – $129,600 |
28% | $130,151 – $210,800 | $129,601 – $209,850 |
33% | $210,801 – $413,350 | $209,851 – $411,500 |
35% | $413,351 – $441,000 | $411,501 – $439,000 |
39.6% | $441,001+ | $439,001+ |
Married Individuals Filing Separate Returns
Tax Rate | 2016 Taxable Income | 2015 Taxable Income |
10% | $0 – $9,275 | $0 – $9,225 |
15% | $9,276 – $37,650 | $9,226 – $37,450 |
25% | $37,651 – $75,950 | $37,451 – $75,600 |
28% | $75,951 – $115,725 | $75,601 – $115,225 |
33% | $115,726 – $206,675 | $115,226 – $205,750 |
35% | $206,676 – $233,475 | $205,751 – $232,425 |
39.6% | $233,476+ | $232,426+ |
Standard Deduction Amounts
Filing Status | 2016 | 2015 | Increase |
Married Filing Jointly (& Surviving Spouse) | $12,600 | $12,600 | $0 |
Married Filing Separately | $6,300 | $6,300 | $0 |
Single | $6,300 | $6,300 | $0 |
Head of Household | $9,300 | $9,250 | $50 |
Standard Deduction for Dependents (“Kiddie” Standard Deduction)
2016 | 2015 | Increase |
$1,050 | $1,050 | $0 |
Personal Exemption Amounts
2016 | 2015 | Increase |
$4,050 | $4,000 | $50 |
Gift Tax Exclusion
2016 | 2015 | Increase |
$14,000 | $14,000 | $0 |
* These numbers are projected for the 2016 tax year and have not been confirmed by the Internal Revenue Service (
