2015 New Developments Part 2

Written by Harold Goedde | Posted in 2016 Tax Changes • 2016 Tax update • Tax Deductions • Tax Education

STANDARD DEDUCTION

The basic amount for single taxpayers is $6,300, married filing joint and surviving spouse $12,600, married filing separate $6,300 (zero if one spouse itemizes because on separate returns both spouses must either itemize or use the standard deduction), and head of household $9,250. The additional standard deduction is $1,550 for singles and head of household, $1,250 for married filing joint and surviving spouse. The standard deduction for those claimed as a dependent on another return can’t exceed the lesser of (1) $6,300 or (2) the greater of $1,050 plus earned income.

PERSONAL EXEMPTIONS

The 2015 basic amount for all taxpayers is $4,000 but phases out at AGI levels of $258,250 to $380,750 for singles, $309,900 to $432,400 for married filing joint and surviving spouses, $154,950 to $216,200 for married filing separate and $284,050 to $406,550 for head of household.

ITEMIZED DEDUCTIONS PHASEOUT

If AGI exceeds an applicable amount for the taxpayer’s filing status, allowable itemized deductions are reduced by the lesser of (1) 3% of the excess of AGI over the applicable amount or (2) 80% of itemized deductions otherwise allowed. The applicable AGI amounts are $258,250 for singles, $309,900 for married filing joint and surviving spouses, $154,950 for married filing separate and $284,050 for head of household.

STANDARD MILEAGE RATES

The mileage rate for business is 57.5 cents per mile (54 cents for 2016) [for depreciation purposes, basis is reduced by 24 cents per mile](, medical and moving 23 cents per mile (19 cents for 2016) and charity work 14 cents per mile (this is unchanged because it is set by statute not the IRS).

EDUCATION EXPENSE DEDUCTION

The new tax law permanently extends the deduction for the adjustment to gross income (deduction for AGI) for elementary and secondary school teachers classroom expenses. An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide at a school for at least 900 hours during a school year. A school means any school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. For taxable years beginning in 2016, the new tax law includes a deduction for professional development expenses. The $250 maximum deduction is indexed for inflation for taxable years beginning in 2016.

SECTION 179 DEDUCTION

(a) The new law provides that the maximum amount of qualifying personal property placed in service during the year that can be expensed for any one tax year starting in taxable year 2015 is $500,000. The maximum amount is reduced by the cost of property that exceeds $2 million. The $500,000 and $2 million is indexed for inflation beginning in taxable year 2016.

(b) The law makes permanent the treatment of off-the-shelf computer software as qualifying property. It also makes permanent the treatment of qualified leasehold improvements on property placed in service more than three years ago. For taxable years beginning in 2015, the law extends the limitation on carryovers and the maximum amount of $250,000 for such taxable year. The law removes the limitation related to Sec 179 property that may be attributable to qualified real property for taxable years beginning in 2016.

Harold Goedde

Dr. Goedde is a former college professor who taught income tax, auditing, personal finance, and financial accounting and has 25 years of experience preparing income tax returns and consulting. He published many accounting and tax articles in professional journals. He is presently retired and does tax return preparation and consulting. He also writes articles on various aspects of taxation. During tax season he works as a volunteer income tax return preparer for seniors and low income persons in the IRS’s VITA program.