Four New Tax Regulations You Need to Know About

If you have not explored the changes to tax regulations effective for the 2016 tax year, it is a good idea to get up to speed before you complete your return. These changes could significantly affect your refund, or result in you owing the IRS. If these new regulations are set to affect you negatively, seek out additional credits and deductions to help.

Affordable Care Act Penalties

The penalties for not having health insurance are increasing. The maximum penalty is now $2,085, which is the premium cost for the average of Bronze Plans in the federal exchange. Avoiding this penalty would have required you to obtain health insurance coverage by the end of February 2016.

Increased Earned Income Credit

The Earned Income Tax Credit was increased. With three qualifying children, the maximum deduction you can be eligible for is $6,269, which is an increase of $27. Families that qualify with no children can only claim $506 for the credit.

Exemption Changes

The amount claimable for personal exemption increased to $4,050. If you are in the higher income brackets, this exemption is not available to you. The trade-off is that heads of household have been given a slight increase to their standard deduction.

Educator Expense Deduction

Teachers that spend their own money on classroom supplies and educational materials may be eligible for a credit. When the educational facility you work for does not reimburse you for your expenses, you may be able to claim a $250 deduction.

Final Thoughts

Before taxes are filed in 2017, additional changes could come into play. It is important to review the IRS website for new tax regulations, especially for regulations which will affect you directly. Many of these increases can be offset with credits and deductions.

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Simplifying the Protecting Americans from the Tax Hikes Act into Layman’s Terms

New tax laws are added every year. These things don’t always make the nightly news. Here are a few pieces of information which will help you understand the newly signed Protecting Americans from the Tax Hikes Act.

Tax Credits Extended

Under this new act, tax credits that were scheduled to expire have been extended. Some of these include the deduction school teachers receive for supplies they purchase during the school year. The American Opportunity Tax Credit was extended. The Enhanced Earned Income Credit was also an extended under this act.

Taxpayers can make tax free distributions from their IRA accounts. This applies after the taxpayer has reached the age of 70 ½. Taxpayers can contribute up to $100,000 a year.

Healthcare Provisions Paused

A moratorium was placed on certain parts of the healthcare act. The moratorium was placed on the excise tax associated with certain medical devices and the excise tax associated with certain high cost healthcare plans.

Changes to Individual Taxpayer Identification Numbers

Individual Taxpayer Identification Numbers (ITINS) are issued to people that need to file a tax return but do not qualify for a social security number. Under the old rule, ITINs would expire after they hadn’t been used for five years. What has changed is that if the taxpayer’s number was issued prior to January 1, 2013, the number will expire on a staggered schedule. If the taxpayer’s number was issued after December 31, 2012, the number will expire if it is not used on a return in three years.

Changes in tax laws can be beneficial. Some of these changes will help you get more money when tax time comes. Check with your tax professional or accountant to see how these new rules will affect you during the next tax season.

Image credit: Alan Cleaver