New Tax Laws For The 2016 Tax Year

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Tax laws change every year. Whether you file your own taxes or hire a professional, it’s in your best interest to make sure that you are aware of these changes. The Internal Revenue Service, or IRS, typically releases this information at the beginning of the year, before filing season begins.
The biggest change made for the 2016 tax year is that tax refund will be held until February 15th for those claiming the Earned Income Tax Credit or the Additional Child Tax Credit. This delay is due to an effort to cut down on fraud related to the two credits. It’s important to note that even though tax refunds will be held until February 15th, taxpayers affected by this delay should expect to receive their refund no earlier than February 27th.
The good news is that the IRS has adjusted the value of some deductions and exemptions for inflation. An exemption reduces the amount of income you pay taxes on your income. Any taxpayer that cannot be claimed as a dependent is entitled to a personal tax exemption. Even if you are married and file jointly, each of you will get an exemption. You can also receive an exemption for each of your dependants.
Deductions lower your taxable income as well. They ensure that a portion of taxpayers income will not be taxed. Standard deductions reduce your taxable income by a set amount of money. Itemized deductions reduce your taxable income based on the expenses you paid during the year. Only certain expenses can be itemized and you must be able to show proof in order to claim the deduction. You also can’t claim both a standard deduction and an itemized deduction. An itemized deduction can only be claimed if the tax benefit would be greater than if you claimed the standard deduction.
According to Turbotax, one of the most popular tax filing software companies, the deductions, and exemptions that got an increase in value are:
  • Personal and dependent exemptions rise to $4,050
  • The standard deduction rises to $9,300 for heads of household while the other filing changes are unchanged
  • The maximum earned income tax credit rises to $6,269
  • The maximum income limit for the EITC rises to $53,505
  • The foreign earned income deduction rises to $101,300
  • Annual deductible amounts for Health Savings Accounts increase for families to $6,750 but with no change for individuals
  • The estate and gift tax exclusion rises to $5.45million
Because of these two tax changes, you may have to wait a bit longer for your refund, but you will also be paying a little less in taxes. Remember that filing online and/or choosing the direct deposit will get you your refund much faster than filing by hand and/or requesting a check. Once you have filed, can you check the status of your return at Where's My Refund?

* Please note that American Hope Resources is NOT a tax authority. Please contact a tax professional or visit irs.gov for more information.
By Alecia Stanton of American Hope Resources
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