2016 Tax Brackets

Wonder where you fall in the latest tax brackets?  

In 2016, the income limits for all brackets and all filers will be adjusted for inflation and will be as follows (Table 1). The top marginal income tax rate of 39.6 percent will hit taxpayers with taxable income of $415,050 and higher for single filers and $466,950 and higher for married filers.

Table 1. 2016 Taxable Income Brackets and Rates (Estimate)
Rate Single Filers Married Joint Filers Head of Household Filers

10%

 $0 to $9,275 $0 to $18,550 $0 to $13,250

15%

 $9,275 to $37,650 $18,550 to $75,300 $13,250 to $50,400

25%

 $37,650 to $91,150 $75,300 to $151,900 $50,400 to $130,150

28%

 $91,150 to $190,150 $151,900 to $231,450 $130,150 to $210,800

33%

 $190,150 to $413,350 $231,450 to $413,350 $210,800 to $413,350

35%

 $413,350 to $415,050 $413,350 to $466,950 $413,350 to $441,000

39.6%

 $415,050+ $466,950+ $441,000+
Source: Author’s Calculations.

Standard Deduction and Personal Exemption

The standard deduction for single and married couples filing jointly will not increase in 2016 (Table 2). For taxpayers filing as head of household, it will increase by $50 from $9,250 to $9,300.

The personal exemption for 2016 will be $4,050.

Table 2. 2016 Standard Deduction and Personal Exemption (Estimate)
Filing Status Deduction Amount
Single  $6,300.00
Married Filing Jointly  $12,600.00
Head of Household  $9,300.00
Personal Exemption  $4,050.00
Source: Author’s Calculations.

PEP and Pease

PEP and Pease are two provisions in the tax code that increase taxable income for high-income earners. PEP is the phase-out of the personal exemption and Pease (named after former Senator Donald Pease) reduces the value of most itemized deductions once a taxpayer’s adjusted gross income reaches a certain amount.

The income threshold for both PEP and Pease will be $259,400 for single filers and $311,300 for married filers (Tables 3 and 4). PEP will end at $381,900 for singles and $433,800 for married couples filing jointly, meaning these taxpayers will no longer have a personal exemption.

Table 3. 2016 Pease Limitations on Itemized Deductions (Estimate)
Filing Status Income
Single  $259,400.00
Married Filing Jointly  $311,300.00
Head of Household  $285,350.00
Source: Author’s Calculations.
Table 4. 2016 Personal Exemption Phase-Out (Estimate)
Filing Status Phase-Out Begin Phase-Out Complete
Single  $259,400.00  $381,900.00
Married Filing Jointly  $311,300.00  $433,800.00
Head of Household  $285,350.00  $407,850.00
Source: Author’s Calculations.

Alternative Minimum Tax

Since its creation in the 1960s, the Alternative Minimum Tax (AMT) has not been adjusted for inflation. Thus, Congress was forced to “patch” the AMT by raising the exemption amount to prevent middle class taxpayers from being hit by the tax as a result of inflation.

On January 2, 2013, the American Taxpayer Relief Act of 2012 indexed the income thresholds to inflation, preventing the necessity for an annual “patch.”

The AMT exemption amount for 2016 is $53,900 for singles and $83,800 for married couples filing jointly (Table 5).

Table 5. 2016 Alternative Minimum Tax Exemptions (Estimate)
Filing Status Exemption Amount
Single  $            53,900.00
Married Filing Jointly  $            83,800.00
Married Filing Separately  $            41,900.00
Source: Author’s Calculations.

Earned Income Tax Credit

2016’s maximum Earned Income Tax Credit for singles, heads of households, and joint filers is $506, if the filer has no children (Table 6). The credit is $3,373 for one child, $5,572 for two children, and $6,268 for three or more children.

Table 6. 2016 Earned Income Tax Credit Parameters (Estimate)
Filing Status No Children One Child Two Children Three or More Children
Single or Head of Household Income at Max Credit

$6,610

$9,920

$13,930

$13,930
Maximum Credit

$506

$3,373

$5,572

$6,268
Phase out Begins

$8,270

$18,190

$18,190

$18,190
Phase out Ends (Credit Equals Zero)

$14,880

$39,296

$44,648

$47,955
Married Filing Jointly Income at Max Credit

$6,610

$9,920

$13,930

$13,930
Maximum Credit

$506

$3,373

$5,572

$6,268
Phase out Begins

$13,810

$23,730

$23,730

$23,730
Phase out Ends (Credit Equals Zero)

$20,420

$44,836

$50,188

$53,495
Source: Author’s Calculations.

information credit:   http://taxfoundation.org/article/2016-tax-brackets