What Are the Tax Filing Thresholds for 2016?

What Are the Tax Filing Thresholds for 2016?

Even if you’re earning income, you may not be required to file a tax return.  It depends largely on whether your income surpasses certain financial thresholds, which differ from year to year and filing status to filing status.  This article will explain how to determine your filing status, and cover the new filing thresholds for 2016.

What is My Filing Status?

Before you can determine whether you’re required to file an income tax return in 2016, you’ll first need to determine your filing status.  There are five possible options:

  1. Single
  2. Married Filing Separately
  3. Married Filing Jointly
  4. Head of Household
  5. Qualifying Widow(er) with Dependent Child

The first three options are fairly straightforward.  Just keep in mind that, if you got married or divorced in the middle of the year, your filing status will be determined by your marital status on the final day of 2015.  It’s also important to remember that the IRS now recognizes same-sex marriages, which means the same rules apply to same-sex couples.

If your spouse passed away in 2015, you may use the Married Filing Jointly status as long as the following statements are all true:

  1. You did not get remarried before the end of the year. (If you did get remarried before the end of the year, you would use the Married Filing Separately status instead.)
  2. Your joint return is approved by the executor or administrator of your spouse’s estate.
  3. Neither you nor your spouse were classified as nonresident aliens for any portion of the year.

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If you do decide to use the Married Filing Jointly status, remember to include your personal income and deductions for the full year.

You may also use the Single filing status if your spouse passed away, but by doing so, will have a higher tax rate and a lower standard deduction than you would if you used the Qualifying Widow(er) with Dependent Child status.  The Qualifying Widow(er) status may be used for up to two years after the decedent’s date of death.  In order to qualify, you:

  • Must not have remarried before the end of the year.
  • Must have paid more than 50% of the expenses for home maintenance and upkeep.
  • Must claim an exemption for a child or stepchild. (Note that foster children are excluded from this criteria.)  Additionally, your child or stepchild must have lived at home with you for the full year, with exceptions for short-term, temporary absences.

As the IRS points out, “The Head of Household status may be the one most often claimed in error.”  You should use the Head of Household status only if both of the following statements are true:

  1. You are single, divorced, or separated.
  2. You were responsible for paying more than 50% of the expenses for home maintenance and upkeep during 2015.

Do I Need to File a Tax Return in 2016?

Once you have determined your filing status, use the list below to find the financial threshold that applies to you based on your age:

  • Single
    • Under 65 – $10,300
    • 65 or Older – $11,850
  • Married
    • Filing Separately – $4,000
    • Filing Jointly (Both Spouses Under 65) – $20,600
    • Filing Jointly (Both Spouses 65 or Older) – $23,100
    • Filing Jointly (One Spouse 65 or Older) – $21, 850
  • Head of Household
    • Under 65 – $13,250
    • 65 or Older – $14,800
  • Qualifying Widow(er) with Dependent Child
    • Under 65 – $16,600
    • 65 or Older – $17,850

If your income surpassed the threshold listed for your age and filing status, you’ll need to file a tax return.

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Keep in mind that the figures provided above represent gross income, which 26 US Code § 61(a) defines to include all of the following:

  • Alimony payments
  • Annuities
  • Any compensation you earned from selling products or services (e.g. salary, hourly wages), including:
    • Commissions
    • Fringe benefits
  • Any gains from property transactions
  • Distributive shares of gross income earned by a business partnership
  • Dividends
  • Income from:
    • Discharge of debts
    • Endowment contracts
    • Interest in an estate
    • Interest in a trust
    • Life insurance
  • “Income in respect of a decedent” (IRD), meaning any taxable portion of an inheritance which the deceased person didn’t receive prior to passing away, such as a final paycheck
  • Interest
  • Pension plans
  • Rents
  • Royalties
  • Separate maintenance payments

While no one could argue that filing thresholds are significant, there are also some situations where you may be required to file a tax return even if your gross income doesn’t exceed the threshold.  In order to make sure you are complying with federal tax laws (and taking full advantage of any credits and deductions for which you may qualify, such as the Foreign Tax Credit), it’s important to work with an experienced CPA when filing your taxes for 2016 – especially if you’re a US citizen or resident abroad.  International taxpayers are subject to intricate and often confusing reporting requirements, and any failures to comply could expose you to tens or hundreds of thousands of dollars in civil penalties.

Don’t wait to get started on your tax return this year.  To set up a free tax consultation, call US Tax Help at (800) 810-9312 today.