Rev. Proc. 2015-53: Inflation adjustments for 2016

Rev. Proc. 2015-53: Inflation adjustments for 2016

The IRS today released an advance copy of Rev. Proc. 2015-53—the annual revenue procedure that sets forth the dollar amounts for more than two dozen tax provisions as adjusted for inflation for 2016.

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Rev. Proc. 2015-53 [PDF 85 KB] provides inflation-adjusted amounts concerning the tax rate schedules, standard deduction, and other tax items.

Certain individual income tax amounts increase, others unchanged for 2016

As briefly explained in a related IRS release—IR-2015-119—the following items reflect the inflation adjustments for 2016:

  • An individual income tax rate of 39.6% applies for single taxpayers whose income exceeds $415,050 (increased from $413,200) and $466,950 for married taxpayers filing a joint return (increased from $464,850).
  • The other marginal income tax rates for individuals—10%, 15%, 25%, 28%, 33% and 35%—and the related income tax thresholds are described in the revenue procedure.
  • The standard deduction for heads of households is increased to $9,300 (up from $9,250). The other standard deduction amounts for 2016 remain as they were for 2015—$6,300 for singles and married persons filing separate returns, and $12,600 for married couples filing jointly.
  • The limitation for itemized deductions to be claimed on tax year 2016 returns of individuals begins with incomes of $259,400 or more ($311,300 for married couples filing jointly).
  • The personal exemption amount rises from $4,000 in 2015 to $4,050 in 2016.  However, the exemption is subject to a phase-out that begins in 2016 with adjusted gross incomes of $259,400 ($311,300 for married couples filing jointly) and phases out completely at $381,900 ($433,800 for married couples filing jointly.)
  • The alternative minimum tax (AMT) exemption amount for tax year 2016 is $53,900 ($83,800 for married couples filing jointly). The 2015 exemption amount was $53,600 ($83,400 for married couples filing jointly).

2016 inflation adjustments—items of general interest

According to Rev. Proc. 2015-53, for tax year 2016: 

  • The foreign earned income exclusion increases to $101,300 (up from $100,800 in 2015).
  • The annual deductible amounts for Medical Savings Accounts (MSAs) for 2016 increase as shown in the table below: 
Medical Savings Accounts (MSAs) Self-only coverage Family coverage
Minimum annual deductible $2,250 $4,450
Maximum annual deductible $3,350 $6,700
Maximum annual out-of-pocket expenses

$4,450 $8,150

Source: Rev. Proc. 2015-53

Estate and gift tax amounts

  • Estates of decedents who die during 2016 have a basic exclusion amount of $5,450,000 (up from a total of $5,430,000 in 2015).
  • For 2016, the exclusion from tax on a gift to a spouse who is not a U.S. citizen is $148,000 (up from $147,000 for 2015).
  • The annual exclusion for gifts remains at $14,000 for 2016.

Inflation adjustments for 2016 —items of interest to exempt organizations

  • The exemption of annual dues paid by a member to an agricultural or horticultural organization that shall not be characterized as “unrelated trade or business” income (UTBI) will be $161.
  • The UTBI of certain exempt organizations will not include a “low cost article” of $10.60 or less.
  • The $5, $25, and $50 guidelines for disregarding insubstantial benefits received by a donor in return for a fully deductible charitable contribution under section 170, as set forth in Rev. Proc. 90-12 (as amplified by Rev. Proc. 92-49, and modified by Rev. Proc. 92-102) will be $10.60, $53, and $106, respectively.
  • For tax years beginning in 2016, the annual per person, family, or entity limitation to qualify for the reporting exception for nondeductible lobbying expenses under section 6033(e)(3) will be $112 or less.

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