The Three Most Important Tax Changes for 2016

income tax changes

It’s tax time, and that means it’s time to take note of the important tax changes that are now in effect for 2016 (and the 2015 tax year). The IRS likes to make changes to their tax tables on a regular basis – because nothing is more confusing than constantly learning more about taxes – and it’s imperative that we learn what those changes are, how they affect our filing situation, and how they affect our tax liability. For 2016, there are several key changes made that you need to take note of before you file your income taxes.

Small Business Owner Tax Breaks

Section 179 is saving business owners significantly this year. You can now deduct up to $500,000 worth of qualifying office or business equipment this year. The deduction was much smaller last year, and this means serious savings for business owners. Do not pass this one up.

Health Insurance Penalties

The federal government is fining anyone without health insurance for the year, and the penalty is significantly more expensive this year than last. If you did not have health insurance in 2015, the fine has increased from the greater of $95 (adults) and $47.50 (children) or 1% of your taxable income to the greater of $325 (adults) and $162.50 (children) or 2% of your taxable income. The news gets worse, too, as we tell you that if you chose not to get health insurance this year, you’re looking at paying the greater of $695 per adult, $347.50 per child or 2.5% of your taxable income when you file your income tax return in 2017.

The American Opportunity Tax Credit is Permanent

This year, this credit is now considered permanent. If you or one of your dependents is a qualifying student at a university, you can now claim this credit, which is worth $2,500. It’s a great credit to deduct since it means you can lower your tax liability significantly and save on your taxes.

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