With a few months remaining in the 2015 tax year, many taxpayers and advisors will likely consult recently released estimates for 2016 exclusions in upcoming financial planning. The inflation-adjusted tax bracket projections for 2016, released by Thomson Reuters, anticipate several tax exclusion increases that may affect tax planning decisions both for the year’s end as well as throughout the coming year.
TrustCounsel’s tax and elder law attorneys in Chapel Hill provide a breakdown of standard, trust, estate, and gift tax exemptions, elder care needs deductions. All items in bold are figures that have adjusted since the 2015 tax year, while non-bold items remain the same.
2016 Standard Deductions
Joint return or surviving spouse – $12,600
Married filing separately – $6,300
Head of Household – $9,300 (up from $9,250 for 2015)
Single – $6,300
Dependents – $1,050, or $350 plus the individual’s earned income, whichever is greater (not to exceed the regular standard deduction for that individual).
2016 Deductions and Rate Schedules for Trusts, Estates, and Gifts
Beginning of the Top Marginal Income Bracket for Trusts and Estates – $12,400 (up from $12,300 for 2015)
Annual exclusion for gifts to non-citizen spouses – $148,000 (up from $147,000 for 2015)
Estate and gift lifetime unified exclusion amount – $5,450,000 (up from $5,430,000 for 2015)
GST lifetime exemption amount – $5,450,000 (up from $5,430,000 for 2015)
Gift tax annual exclusion amount – $14,000
Reporting threshold amount for gifts from foreign corporations and foreign partnerships – $15,671 (up from $15,601 for 2015)
Foreign earned income exclusion (off-shore trusts) – $101,300 (up from $100,800 for 2015)
2016 Deductions for Elder Care Needs
Insurance premiums paid to cover qualified long term care (“LTC”) services can be deducted as medical expenses as follows:
Age 40 and under – $390 (up from $380 for 2015)
Age 40+-50 – $730 (up from $710 for 2015)
Age 50+-60 – $1,460 (up from $1,430 for 2015)
Age 60+-70 – $3,900 (up from $3,800 for 2015)
Age 70+ – $4,870 (up from $4,750 for 2015)
Although the above LTC deductions increased slightly (no more than 3 percent at the greatest increase), the costs of LTC insurance continue to rise faster than inflation. Read our elder law attorneys’ post on LTC insurance costs
, which were 8.6 percent higher in 2015 than 2014.
Individuals should share the latest tax information with family and discuss tax planning steps with a professional tax advisor. Regular plan updates can help to minimize tax requirements and preserve assets, both now and as part of one’s future estate.