2016 Tax Update
2016 Tax Update Advanced Solutions Income Taxes
Estate and Gift Taxes
2015 If taxable income is: Over
For deaths/gifts occurring in 2016
2016
If taxable estate is:
If taxable income is:
But not >
Of the amount >
The tax is
But not >
Over
The tax is
Of the amount >
Over
But not >
The tax is
Of the amount >
Married filing jointly $0 18,450 74,900 151,200 230,450 411,500 464,850
$18,150 $0 + 10% 74,900 1,845 + 15% 151,200 10,313 + 25% 230,450 29,388 + 28% 411,500 51,578 + 33% 464,850 111,324 + 35% — 129,997 + 39.6%
$0 18,450 74,900 151,200 230,450 411,500 464,850
$0 18,550 75,300 151,900 231,450 413,350 466,950
$18,550 $0 + 10% 75,300 1,855 + 15% 151,900 10,368 + 25% 231,450 29,518 + 28% 413,350 51,792 + 33% 466,950 111,819 + 35% — 130,579 + 39.6%
$0 18,550 75,300 151,900 231,450 413,350 466,950
$9,225 37,450 90,750 189,300 411,500 413,200 —
$0 + 10% 923 + 15% 5,156 + 25% 18,481 + 28% 46,075 + 33% 119,401 + 35% 119,996 + 39.6%
$0 9,225 37,450 90,750 189,300 411,500 413,200
$0 9,275 37,650 91,150 190,150 413,350 415,050
$9,275 $0 + 10% 37,650 928 + 15% 91,150 5,184 + 25% 190,150 18,559 + 28% 413,350 46,279 + 33% 415,050 119,935 + 35% — 120,530 + 39.6%
$0 9,275 37,650 91,150 190,150 413,350 415,050
$0 + 15% 375 + 25% 1,225 + 28% 2,107 + 33% 3,180 + 39.6%
$0 2,500 5,900 9,050 12,300
$0 2,550 5,950 9,050 12,400
Single $0 9,225 37,450 90,750 189,300 411,500 413,200
Estates and trusts $0 2,500 5,900 9,050 12,300
$2,500 5,900 9,050 12,300 —
Over
But not >
The tax is
Of the amount >
$0 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333
$50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 —
$0 + 15% 7,500 + 25% 13,750 + 34% 22,250 + 39% 113,900 + 34% 3,400,000 + 35% 5,150,000 + 38% 6,416,667 + 35%
$0 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333
Professional corporation: flat 35% Phased out by 2% for each $2,500 by which AGI exceeds threshold.
Exemption
AGI threshold/upper limit
Married filing jointly
2015 2016
$4,000 $4,050
$309,900/$432,400 $311,300/$433,800
Single
2015 2016
$4,000 $4,050
$258,250/$380,750 $259,400/$381,900
Capital Gains (2016)
10, 15%
S-T 12 mos. 0% Qualified 0% dividends
$0 + 15% 383 + 25% 1,233 + 28% 2,101 + 33% 3,206 + 39.6%
$0 2,550 5,950 9,050 12,400
$186,300
Exemption amts.
2015
2016
$83,400 $53,600 $23,800
$83,800 $53,900 $23,900
Phase-out thresholds for 2016 Married filing jointly $159,700–$494,900 $119,700–$335,300 Single $79,850–$175,450 Estates and trusts
39.6%
Ordinary rate 15%
Ordinary rate 20% 20%
Unearned inc. $200,000 who have investment income will be subject to additional 3.8% tax on the lesser of net investment income or the excess of MAGI over the threshold amount, whichever amount is less. Investment income is defined as the sum of gross income from interest, dividends, annuities, royalties, and rents and net gain attributable to the disposition of property.
Child Tax Credit
$1,000 per child; phases out $50 for each $1,000 of MAGI over $110,000 (married filing jointly) or $75,000 (single)
2015
2016
$18,000 $12,500 $18,000 $53,000 $600 $53,000 $265,000 $210,000 $120,000 $170,000 $5,011
$18,000 $12,500 $18,000 $53,000 $600 $53,000 $265,000 $210,000 $120,000 $170,000 $5,011
Base amt. of mod. AGI causing Soc. Sec. benefits to be taxable 50% taxable 85% taxable
No tax 10% tax Parents’ rate
Addt’l 65+ or blind
Qualified Plans
$0 10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000
Social Security
Kiddie Tax
First Next Amts. over
$0 + 18% 1,800 + 20% 3,800 + 22% 8,200 + 24% 13,000 + 26% 18,200 + 28% 23,800 + 30% 38,800 + 32% 70,800 + 34% 155,800 + 37% 248,300 + 39% 345,800 + 40%
3.8% Surtax on Unearned Income
26% 28%
Married filing jointly Single Estates and trusts
$10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 —
Portability: An executor can elect to allocate the unused portion of a decedent’s exclusion amount to the surviving spouse.
AMTI less exemption amount
Standard Deductions
Taxpayer bracket 25, 28, 33, 35%
15%
Alternative Minimum Tax
C-Corporations (for all tax years since 1993)
Personal Exemptions
$2,550 5,950 9,050 12,400 —
$0 10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000
Married filing jointly Single
$32,000 $25,000
$44,000 $34,000
Maximum earnings before Soc. Sec. benefits are reduced Under FRA (lose $1 for every $2) Year FRA is attained (months prior to FRA lose $1 for every $3) Once FRA is attained
2015
2016
$15,720 $41,880
$15,720 $41,880
No limit
No limit
Maximum compensation subject to FICA taxes Social Security maximum Medicare maximum
$118,500 No limit
$118,500 No limit
FRA: full retirement age Social Security tax rate: 12.4% self-employed, 6.2% employees Medicare tax rate: 2.9% self-employed, 1.45% employees
Long-Term Care Insurance
Max. qualified LTC premiums eligible for deductions: 40 or less 41–50 51–60 61–70 Over 70 $380 $710 $1,430 $3,800 $4,750 2015 $390 $730 $1,460 $3,900 $4,870 2016 Qualified LTC contract per diem limit: $340 ($330 in 2015)
2016 Tax Update Advanced Solutions
Roth IRAs
IRAs
AGI Phase-Out Range for Contributions to Roth IRAs
Roth IRA Conversion Rules
Married filing jointly Single
2010* and later: unlimited modified AGI and any tax filing status
$184,000–$194,000 $117,000–$132,000
Traditional IRA Deductibility Rules Filing status
Single
Married filing jointly
Covered by employer’s retirement plan?
Contribution Limits — Traditional and Roth Regular Catch-up*
2015
2016
Deductibility
Any amount
Any amount
Full deduction
Yes
$60,999 or less $61,000–$70,999 $71,000 or more
$60,999 or less $61,000–$70,999 $71,000 or more
Full deduction Partial deduction No deduction
Neither spouse covered
Any amount
Any amount
Full deduction
Both spouses covered
$97,999 or less $98,000–$117,999 $118,000 or more
$97,999 or less $98,000–$117,999 $118,000 or more
Full deduction Partial deduction No deduction
One spouse covered For covered spouse
$97,999 or less $98,000–$117,999 $118,000 or more
$97,999 or less $98,000–$117,999 $118,000 or more
Full deduction Partial deduction No deduction
For calculating required minimum distributions (RMDs) from qualified plans and traditional IRAs Current Age
401(k), 403(b), SARSEP and 457 plans SIMPLE IRA and SIMPLE 401(k) plans
2015
2016
$6,000 $3,000
$6,000 $3,000
Education Incentives Coverdell Education Savings Accounts (Education IRAs) — Contribution Limit $2,000
Modified AGI phase-out range for contributions to Coverdell Education Savings Accounts Married filing jointly Single
Qualified Tuition Programs — Section 529 Plans
$190,000–$220,000 $95,000–$110,000
Distributions for qualified higher education expenses are income-tax free.
American Opportunity Tax Credit/Hope Learning Credits
Hope credit — up to $2,500 per student for first four years of higher education tuition paid. 2015 $160,000–$180,000 $80,000–$90,000
2016 $160,000–$180,000 $80,000–$90,000
Lifetime Learning Credits
70 71 72 73 74 75 76 77 78 79 80 81 82 83 84
Married filing jointly Single
$110,000–$130,000 $55,000–$65,000
2016 $111,000–$131,000 $55,000–$65,000
Exclusion of U.S. Savings Bond Income for Qualified Higher Education Expenses Modified AGI phase-outs Married filing jointly Single
2015 $115,750–$145,750 $77,200–$92,200
2016 $116,300–$146,300 $77,550–$92,550
Student Loan Interest Deduction — Maximum Deduction $2,500 Modified AGI phase-outs Married filing jointly Single Deductibility period
2015 $130,000–$160,000 $65,000–$80,000 No time limit
Current Age
27.4 26.5 25.6 24.7 23.8 22.9 22.0 21.2 20.3 19.5 18.7 17.9 17.1 16.3 15.5
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
Dist. Period 14.8 14.1 13.4 12.7 12.0 11.4 10.8 10.2 9.6 9.1 8.6 8.1 7.6 7.1 6.7
Contributions to employer plans and IRAs. Max credit $1,000 per taxpayer — AGI limits below.
Married filing jointly
$0–$37,000 $37,001–$40,000 $40,001–$61,500 Over $61,500
Single
Credit
$0–$18,500 $18,501–$20,000 $20,001–$30,750 Over $30,750
50% of contribution 20% of contribution 10% of contribution Not available
Health Savings Accounts — HSAs An “eligible individual” is defined as (1) one covered by a high deductible health plan (HDHP) (an annual deductible of $1,300 for single coverage and $2,600 for family coverage where the maximum out of pocket cannot exceed $6,550 for single coverage and $13,100 for family coverage), (2) is not covered by any other health insurance except for some permitted coverages, (3) is not eligible for and enrolled in Medicare, and (4) cannot be claimed as a dependent on someone else’s income tax return. Contribution limits Single Family
2015
2016
$3,350 $6,650
$3,350 $6,750
Itemized deductions repealed through 2012
Up to 20% of tuition paid (maximum credit is $2,000); calculated per taxpayer. 2015
Dist. Period
Saver’s Tax Credit
Catch-Up Contribution Limits for Other Qualified Plan Types
Modified AGI phase-outs
$5,500 $1,000
Uniform Lifetime Table
$183,999 or less $183,999 or less Full deduction One spouse covered $184,000–$193,999 $184,000–$193,999 Partial deduction For non-covered spouse $194,000 or more $194,000 or more No deduction
Married filing jointly Single
2013–2016
$5,000 $1,000
*Only taxpayers age 50 and over are eligible. Modified AGI
No
Modified AGI phase-outs
2008–2012
2016 $130,000–$160,000 $65,000–$80,000 No time limit
2016: Reduced by 3% of taxpayer’s AGI in excess of $311,300 (MFJ) and $259,400 (single). A taxpayer can’t lose more than 80% of their deduction as a result of the limitation. Repealed for AGI below thresholds. Life insurance offered through Allstate Life Insurance Company, Northbrook, IL; Allstate Insurance Company, Northbrook, IL; Lincoln Benefit Life Company, Lincoln, NE and American Heritage Life Insurance Company, Jacksonville, FL. In New York, life insurance offered through Allstate Life Insurance Company of New York, Hauppauge, NY. Securities offered through Allstate Financial Services, LLC. Registered Broker-Dealer. Member FINRA, SIPC. Main Office: 2920 South 84th Street, Lincoln, NE 68506. 877-525-5727. This material is intended for general educational purposes only. Please note that neither the offering insurance company nor any of its agents or representatives can give legal or tax advice. The brief discussion of taxes in this brochure may not be complete or necessarily current. The tax laws and regulations are complex and subject to change. For complete details, consult your attorney or tax advisor.
Please note that Allstate and its licensed representatives do not provide legal or tax advice. Consult an attorney or tax advisor. Date of first issue 11/14. ALR1158-1 11/15 ©2016 Allstate Insurance Company
Estate and Gift Taxes
2015 If taxable income is: Over
For deaths/gifts occurring in 2016
2016
If taxable estate is:
If taxable income is:
But not >
Of the amount >
The tax is
But not >
Over
The tax is
Of the amount >
Over
But not >
The tax is
Of the amount >
Married filing jointly $0 18,450 74,900 151,200 230,450 411,500 464,850
$18,150 $0 + 10% 74,900 1,845 + 15% 151,200 10,313 + 25% 230,450 29,388 + 28% 411,500 51,578 + 33% 464,850 111,324 + 35% — 129,997 + 39.6%
$0 18,450 74,900 151,200 230,450 411,500 464,850
$0 18,550 75,300 151,900 231,450 413,350 466,950
$18,550 $0 + 10% 75,300 1,855 + 15% 151,900 10,368 + 25% 231,450 29,518 + 28% 413,350 51,792 + 33% 466,950 111,819 + 35% — 130,579 + 39.6%
$0 18,550 75,300 151,900 231,450 413,350 466,950
$9,225 37,450 90,750 189,300 411,500 413,200 —
$0 + 10% 923 + 15% 5,156 + 25% 18,481 + 28% 46,075 + 33% 119,401 + 35% 119,996 + 39.6%
$0 9,225 37,450 90,750 189,300 411,500 413,200
$0 9,275 37,650 91,150 190,150 413,350 415,050
$9,275 $0 + 10% 37,650 928 + 15% 91,150 5,184 + 25% 190,150 18,559 + 28% 413,350 46,279 + 33% 415,050 119,935 + 35% — 120,530 + 39.6%
$0 9,275 37,650 91,150 190,150 413,350 415,050
$0 + 15% 375 + 25% 1,225 + 28% 2,107 + 33% 3,180 + 39.6%
$0 2,500 5,900 9,050 12,300
$0 2,550 5,950 9,050 12,400
Single $0 9,225 37,450 90,750 189,300 411,500 413,200
Estates and trusts $0 2,500 5,900 9,050 12,300
$2,500 5,900 9,050 12,300 —
Over
But not >
The tax is
Of the amount >
$0 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333
$50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 —
$0 + 15% 7,500 + 25% 13,750 + 34% 22,250 + 39% 113,900 + 34% 3,400,000 + 35% 5,150,000 + 38% 6,416,667 + 35%
$0 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333
Professional corporation: flat 35% Phased out by 2% for each $2,500 by which AGI exceeds threshold.
Exemption
AGI threshold/upper limit
Married filing jointly
2015 2016
$4,000 $4,050
$309,900/$432,400 $311,300/$433,800
Single
2015 2016
$4,000 $4,050
$258,250/$380,750 $259,400/$381,900
Capital Gains (2016)
10, 15%
S-T 12 mos. 0% Qualified 0% dividends
$0 + 15% 383 + 25% 1,233 + 28% 2,101 + 33% 3,206 + 39.6%
$0 2,550 5,950 9,050 12,400
$186,300
Exemption amts.
2015
2016
$83,400 $53,600 $23,800
$83,800 $53,900 $23,900
Phase-out thresholds for 2016 Married filing jointly $159,700–$494,900 $119,700–$335,300 Single $79,850–$175,450 Estates and trusts
39.6%
Ordinary rate 15%
Ordinary rate 20% 20%
Unearned inc. $200,000 who have investment income will be subject to additional 3.8% tax on the lesser of net investment income or the excess of MAGI over the threshold amount, whichever amount is less. Investment income is defined as the sum of gross income from interest, dividends, annuities, royalties, and rents and net gain attributable to the disposition of property.
Child Tax Credit
$1,000 per child; phases out $50 for each $1,000 of MAGI over $110,000 (married filing jointly) or $75,000 (single)
2015
2016
$18,000 $12,500 $18,000 $53,000 $600 $53,000 $265,000 $210,000 $120,000 $170,000 $5,011
$18,000 $12,500 $18,000 $53,000 $600 $53,000 $265,000 $210,000 $120,000 $170,000 $5,011
Base amt. of mod. AGI causing Soc. Sec. benefits to be taxable 50% taxable 85% taxable
No tax 10% tax Parents’ rate
Addt’l 65+ or blind
Qualified Plans
$0 10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000
Social Security
Kiddie Tax
First Next Amts. over
$0 + 18% 1,800 + 20% 3,800 + 22% 8,200 + 24% 13,000 + 26% 18,200 + 28% 23,800 + 30% 38,800 + 32% 70,800 + 34% 155,800 + 37% 248,300 + 39% 345,800 + 40%
3.8% Surtax on Unearned Income
26% 28%
Married filing jointly Single Estates and trusts
$10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000 —
Portability: An executor can elect to allocate the unused portion of a decedent’s exclusion amount to the surviving spouse.
AMTI less exemption amount
Standard Deductions
Taxpayer bracket 25, 28, 33, 35%
15%
Alternative Minimum Tax
C-Corporations (for all tax years since 1993)
Personal Exemptions
$2,550 5,950 9,050 12,400 —
$0 10,000 20,000 40,000 60,000 80,000 100,000 150,000 250,000 500,000 750,000 1,000,000
Married filing jointly Single
$32,000 $25,000
$44,000 $34,000
Maximum earnings before Soc. Sec. benefits are reduced Under FRA (lose $1 for every $2) Year FRA is attained (months prior to FRA lose $1 for every $3) Once FRA is attained
2015
2016
$15,720 $41,880
$15,720 $41,880
No limit
No limit
Maximum compensation subject to FICA taxes Social Security maximum Medicare maximum
$118,500 No limit
$118,500 No limit
FRA: full retirement age Social Security tax rate: 12.4% self-employed, 6.2% employees Medicare tax rate: 2.9% self-employed, 1.45% employees
Long-Term Care Insurance
Max. qualified LTC premiums eligible for deductions: 40 or less 41–50 51–60 61–70 Over 70 $380 $710 $1,430 $3,800 $4,750 2015 $390 $730 $1,460 $3,900 $4,870 2016 Qualified LTC contract per diem limit: $340 ($330 in 2015)
2016 Tax Update Advanced Solutions
Roth IRAs
IRAs
AGI Phase-Out Range for Contributions to Roth IRAs
Roth IRA Conversion Rules
Married filing jointly Single
2010* and later: unlimited modified AGI and any tax filing status
$184,000–$194,000 $117,000–$132,000
Traditional IRA Deductibility Rules Filing status
Single
Married filing jointly
Covered by employer’s retirement plan?
Contribution Limits — Traditional and Roth Regular Catch-up*
2015
2016
Deductibility
Any amount
Any amount
Full deduction
Yes
$60,999 or less $61,000–$70,999 $71,000 or more
$60,999 or less $61,000–$70,999 $71,000 or more
Full deduction Partial deduction No deduction
Neither spouse covered
Any amount
Any amount
Full deduction
Both spouses covered
$97,999 or less $98,000–$117,999 $118,000 or more
$97,999 or less $98,000–$117,999 $118,000 or more
Full deduction Partial deduction No deduction
One spouse covered For covered spouse
$97,999 or less $98,000–$117,999 $118,000 or more
$97,999 or less $98,000–$117,999 $118,000 or more
Full deduction Partial deduction No deduction
For calculating required minimum distributions (RMDs) from qualified plans and traditional IRAs Current Age
401(k), 403(b), SARSEP and 457 plans SIMPLE IRA and SIMPLE 401(k) plans
2015
2016
$6,000 $3,000
$6,000 $3,000
Education Incentives Coverdell Education Savings Accounts (Education IRAs) — Contribution Limit $2,000
Modified AGI phase-out range for contributions to Coverdell Education Savings Accounts Married filing jointly Single
Qualified Tuition Programs — Section 529 Plans
$190,000–$220,000 $95,000–$110,000
Distributions for qualified higher education expenses are income-tax free.
American Opportunity Tax Credit/Hope Learning Credits
Hope credit — up to $2,500 per student for first four years of higher education tuition paid. 2015 $160,000–$180,000 $80,000–$90,000
2016 $160,000–$180,000 $80,000–$90,000
Lifetime Learning Credits
70 71 72 73 74 75 76 77 78 79 80 81 82 83 84
Married filing jointly Single
$110,000–$130,000 $55,000–$65,000
2016 $111,000–$131,000 $55,000–$65,000
Exclusion of U.S. Savings Bond Income for Qualified Higher Education Expenses Modified AGI phase-outs Married filing jointly Single
2015 $115,750–$145,750 $77,200–$92,200
2016 $116,300–$146,300 $77,550–$92,550
Student Loan Interest Deduction — Maximum Deduction $2,500 Modified AGI phase-outs Married filing jointly Single Deductibility period
2015 $130,000–$160,000 $65,000–$80,000 No time limit
Current Age
27.4 26.5 25.6 24.7 23.8 22.9 22.0 21.2 20.3 19.5 18.7 17.9 17.1 16.3 15.5
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
Dist. Period 14.8 14.1 13.4 12.7 12.0 11.4 10.8 10.2 9.6 9.1 8.6 8.1 7.6 7.1 6.7
Contributions to employer plans and IRAs. Max credit $1,000 per taxpayer — AGI limits below.
Married filing jointly
$0–$37,000 $37,001–$40,000 $40,001–$61,500 Over $61,500
Single
Credit
$0–$18,500 $18,501–$20,000 $20,001–$30,750 Over $30,750
50% of contribution 20% of contribution 10% of contribution Not available
Health Savings Accounts — HSAs An “eligible individual” is defined as (1) one covered by a high deductible health plan (HDHP) (an annual deductible of $1,300 for single coverage and $2,600 for family coverage where the maximum out of pocket cannot exceed $6,550 for single coverage and $13,100 for family coverage), (2) is not covered by any other health insurance except for some permitted coverages, (3) is not eligible for and enrolled in Medicare, and (4) cannot be claimed as a dependent on someone else’s income tax return. Contribution limits Single Family
2015
2016
$3,350 $6,650
$3,350 $6,750
Itemized deductions repealed through 2012
Up to 20% of tuition paid (maximum credit is $2,000); calculated per taxpayer. 2015
Dist. Period
Saver’s Tax Credit
Catch-Up Contribution Limits for Other Qualified Plan Types
Modified AGI phase-outs
$5,500 $1,000
Uniform Lifetime Table
$183,999 or less $183,999 or less Full deduction One spouse covered $184,000–$193,999 $184,000–$193,999 Partial deduction For non-covered spouse $194,000 or more $194,000 or more No deduction
Married filing jointly Single
2013–2016
$5,000 $1,000
*Only taxpayers age 50 and over are eligible. Modified AGI
No
Modified AGI phase-outs
2008–2012
2016 $130,000–$160,000 $65,000–$80,000 No time limit
2016: Reduced by 3% of taxpayer’s AGI in excess of $311,300 (MFJ) and $259,400 (single). A taxpayer can’t lose more than 80% of their deduction as a result of the limitation. Repealed for AGI below thresholds. Life insurance offered through Allstate Life Insurance Company, Northbrook, IL; Allstate Insurance Company, Northbrook, IL; Lincoln Benefit Life Company, Lincoln, NE and American Heritage Life Insurance Company, Jacksonville, FL. In New York, life insurance offered through Allstate Life Insurance Company of New York, Hauppauge, NY. Securities offered through Allstate Financial Services, LLC. Registered Broker-Dealer. Member FINRA, SIPC. Main Office: 2920 South 84th Street, Lincoln, NE 68506. 877-525-5727. This material is intended for general educational purposes only. Please note that neither the offering insurance company nor any of its agents or representatives can give legal or tax advice. The brief discussion of taxes in this brochure may not be complete or necessarily current. The tax laws and regulations are complex and subject to change. For complete details, consult your attorney or tax advisor.
Please note that Allstate and its licensed representatives do not provide legal or tax advice. Consult an attorney or tax advisor. Date of first issue 11/14. ALR1158-1 11/15 ©2016 Allstate Insurance Company
