6 Important Income Tax Changes for Citizens Abroad in 2016

6 Important Income Tax Changes for Citizens Abroad in 2016

There’s a famous quote that says nothing is certain but death and taxes.  Yet while taxes may be certain, consistency in the tax code is not.  Whether you’re a citizen abroad or live on US soil, there are six significant changes you should know about when filing taxes in 2016.   

2016 Tax Brackets, Tax Rates, and Changes to the Filing Deadline

Several legislative updates may affect your taxes in 2016, including the filing deadline and alterations to tax rates and tax brackets (which increased by about 0.4% overall).  Make sure to keep the following updates in mind as you prepare to file:

 

  1. New deadlines give taxpayers more time to file an income tax return.  The deadline to file taxes in 2016 is Monday, April 18, not the usual April 15 deadline.  The date was pushed back due to Emancipation Day, which happens to fall on April 15 this year.  If you’re a resident of Maine or Massachusetts, Patriot’s Day gives you even more additional time, bringing your deadline to Tuesday, April 19.
  2. Changes to tax rates and tax brackets.  Tax brackets and tax rates have changed from 2015 to 2016.  The 2016 rates and brackets are listed below:

 

  • Single Filers 
    • $0 to $9,275 – 10% of taxable income
    • $9,276 to $37,650 – $927.50 plus 15% of income above $9,275
    • $37,651 to $91,150 – $5,183.75 plus 25% of income above $37,650
    • $91,151 to $190,150 – $18,558.75 plus 28% of income above $91,150
    • $190,151 to $413,350 – $46,278.75 plus 33% of income above $190,150
    • $413,351 to $415,050 – $119,934.75 plus 35% of income above $413,350
    • $415,051 and above – $120,529.75 plus 39.6% of income above $415,050
  • Heads of Household (HOH) 
    • $0 to $13,250 – 10% of taxable income
    • $13,251 to $50,400 – $1,325 plus 15% of income above $13,250
    • $50,401 to $130,150 – $6,897.50 plus 25% of income above $50,400
    • $130,151 to $210,800 – $26,835 plus 28% of income above $130,150
    • $210,801 to $413,350 – $49,417 plus 33% of income above $210,800
    • $413,351 to $441,000 – $116,258.50 plus 35% of income above $413,350
    • $441,001 and above – $125,936 plus 39.6% of income above $441,000

 

  • Married, Filing Jointly/Qualifying Widow(er)s
    • $0 to $18,550 – 10% of taxable income
    • $18,551 to $75,300 – $1,855 plus 15% of income above $18,550 \
    • $75,301 to $151,900 – $10,367.50 plus 25% of income above $75,300
    • $151,901 to $231,450 – $29,517.50 plus 28% of income above $151,900
    • $231,451 to $413,350 – $51,791.50 plus 33% of income above $231,450
    • $413,351 to $466,950 – $111,818.50 plus 35% of income above $413,350
    • $466,951 and above – $130,578.50 plus 39.6% of income above $466,950

 

  • Married, Filing Separately 
    • $0 to $9,275 – 10% of taxable income
    • $9,276 to $37,650 – $927.50 plus 15% of income above $9,275
    • $37,651 to $75,950 – $5,183.75 plus 25% of income above $37,650
    • $75,951 to $115,725 – $14,758.75 plus 28% of income above $75,950
    • $115,726 to $206,675 – $25,895.75 plus 33% of income above $115,725
    • $206,676 to $233,475 – $55,909.25 plus 35% of income above $206,675
    • $233,476 and above – $65,289.25 plus 39.6% of income above $233,475

 

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4 More Tax Updates for US Residents and American Citizens Abroad

US residents aren’t the only taxpayers responsible for filing an income tax return.  As we’ve stated before, citizens abroad must file taxes too – and, like taxpayers who reside within the United States, they may also be affected by several new policy changes, such as:

  1. Increases to the foreign earned income exclusion.  Claiming the foreign earned income exclusion (FEIE) allows qualified taxpayers to avoid the burden of double-taxation.  In 2016, the limit will increase by $500 ($100,800 to $101,300).
  2. Increased penalties for not having healthcare coverage.  The Affordable Care Act (ACA) raises the penalties for lack of adequate coverage.  In 2016, uncovered adults face a penalty of $695 or 2.5% of his or her income.  In 2015, the per-adult penalty was $285 per adult or 2% of income.
  3. Increased personal exemptions.  Personal exemptions will increase by $50 ($4,000 to $4,050).
  4. Increased standard deductions for taxpayers filing as HOH.  The standard deduction for HOH filers will also increase by $50 ($9,250 to $9,300).

For additional information, see our article on important forms for filing taxes in 2016.  If you have any questions, no matter how minor, you should speak to an experienced CPA right away.  Even a tiny mistake or omission could have significant financial repercussions for you – and if the IRS determines that you intentionally violated any tax laws, you could even come under investigation for tax evasion or other federal crimes.

Worried About Your US Taxes? Contact CPA Ted Kleinman

Don’t miss out on valuable credits and deductions, or worse, let a preventable error cost you thousands of dollars.  For professional, personalized assistance with tax preparation in 2016, call US Tax Help at (800) 810-9312 to set up a free consultation.  Founder Ted Kleinman has over 20 years of experience working with American taxpayers in the US and abroad.