2016 Tax Brackets & Standard Deductions Increased




Last week, the IRS released the 2016 tax brackets and standard deduction amounts, and there will be a number of inflation adjustments over the 2015 tax brackets and standard deductions. Granted, the changes are minimal, given a CPI increase of less than 0.5% this past year.

Armed with the below information, it would be an excellent time to calculate what your modified adjusted gross income will likely be next year and modify your tax allowances on your W4 form. This will help prevent being penalized for underpayment of taxes or getting a refund (which is really a form of self penalization by letting the government borrow your money, interest-free).

It is important to know that the highlighted rates represent the income tax rate owed for the portion of your taxable income that falls into that bracket. As an example with the below rates, if you are single and your taxable income is $50,000, your tax tax rate on your first $9,275 of taxable income is 10%, while taxable income between $9,275 and $37,650 is taxed at 15%, and income from $37,650 to $50,000 is taxed at 25%.

Many incorrectly assume that if your total income peaks at the 35% tax bracket, for example, all of your income is taxed at that rate. That is not true. The United States federal income tax system is a “progressive” system and the result is your actual tax rate is less than the tax rate in the top bracket you are in. With that in mind, here are the 2016 tax brackets.

2016 Tax Bracket Rates

2016 Tax Brackets for Singles:

2016 tax brackets

10% – $0-$9,275 (up from $9,225)
15% – $9,275-$37,650 (up from $9,225-$37,450)
25% – $37,650-$91,150 (up from $37,450-$90,750)
28% – $91,150-$190,150 (up from $90,750-$189,300)
33% – $190,150-$413,350 (up from $189,300-$411,500)
35% – $413,350-$415,050 (up from $411,500-$413,200)
39.6% – $415,050+ (up from $413,200+)

2016 Tax Brackets for Married Filing Jointly:

10% – $0-$18,550 (up from $0-$18,550)
15% – $18,550-$75,300 (up from $18,450-$74,900)
25% – $75,300-$151,900 (up from $74,900-$151,200)
28% – $151,900-$231,450 (up from $151,200-$230,450)
33% – $231,450-$413,350 (up from $230,450-$411,500)
35% – $413,350-$466,950 (up from $411,500-$464,850)
39.6% – $466,950+ (up from $464,850+)

2016 Tax Brackets for Married Filing Separately:

10% – $0-$9,275 (up from $0-$9,075)
15% – $9,275-$37,650 (up from $9,225-$37,450)
25% – $37,650-$75,950 (up from $37,450-$75,600)
28% – $75,950-$115,725 (up from $75,600-$115,225)
33% – $115,725-$206,675 (up from $115,225-$205,750)
35% – $206,675-$233,475 (up from $205,750-$232,425)
39.6% – $233,475+ (up from $232,425+)




2016 Tax Brackets for Head Of Household:

10% – $0-$13,250 (up from $0-$13,150)
15% – $13,250-$50,400 (up from $13,150-$50,200)
25% – $50,400-$130,150 (up from $50,200-$129,600)
28% – $130,150-$210,800 (up from $129,600-$209,850)
33% – $210,800-$413,350 (up from $209,850-$411,500)
35% – $413,350-$441,000 (up from $411,500-$439,000)
39.6% – $441,000+ (up from $439,000+)

2016 Standard Deductions

Standard tax deductions can lower your taxable income by the amounts below, if you decide not to itemize taxes. Oddly, only one of the 2016 standard deductions (head of household) have increased due to inflation adjustments:

  • 2016 standard deductions$6,300 for single filers (no change)
  • $6,300 for married, filing separately (no change)
  • $12,600 for married filing jointly (no change)
  • $9,300 for head of household (up from $9,250)
  • $1,050 for dependents (no change)

Tax Rate Discussion:

  • Which tax bracket will you top out in for this year and what are you predicting for 2016?
  • Will you be itemizing or taking the standard deduction? Why?

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4 Comments

  1. Brad
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