Certain tax numbers are adjusted annually for inflation, as required by law. Being aware of these changes lets you make updates to your tax planning and take full advantage of retirement and other tax-advantaged savings. Here are some of the 2016 tax numbers you’ll need to use as you get started with this year’s planning.
- The maximum earnings subject to social security tax is $118,500. If you’re under full retirement age, the earnings limit is $15,720. Once you reach full retirement age there is no earnings limit.
- The “nanny tax” threshold increases to $2,000 for 2016. If you pay household workers more than this amount during the year, you’re responsible for payroll taxes.
- The “kiddie tax” threshold is unchanged for 2016. If your under-age-19 child (under age 24 for full-time students) has more than $2,100 of unearned income during the year (such as dividends and interest income), the excess could be taxed at your highest rate.
- The maximum individual retirement account contribution you can make in 2016 remains unchanged at $5,500 if you’re under age 50 and at $6,500 if you are 50 or older.
- The maximum amount of wages you can contribute to your 401(k) plan remains at $18,000. The 2016 maximum allowed for SIMPLE plans remains at $12,500. If you are 50 or older, you can contribute up to $24,000 to a 401(k) and $15,500 to a SIMPLE plan.
- For 2016, the maximum amount you can contribute to a health savings account is $3,350 for individuals and $6,750 for families.
Tax legislation could change these and other tax numbers at any time. Before making important business and personal financial decisions this year, contact us for the latest rules.