While there are efforts in Congress to reform the Internal Revenue Code, and presidential candidates from both parties are calling for changes in the IRC, including shifts in the income tax brackets and an end to the federal estate tax, advisors and their clients must use the current tax code to plan.
The Internal Revenue Service announced Wednesday its annual inflation adjustments for more than 50 tax provisions for tax year 2016. The adjustments, detailed in IRS Revenue Procedure 2015-53, are muted because of the tempered inflation rate in 2015.
The 39.6% top income tax rate will be levied on single taxpayers whose income exceeds $415,050, or $466,950 for married taxpayers filing jointly, up from $413,200 and $464,850, respectively (see full chart below).
In perhaps the biggest change, the IRS has increased the amount taxpayers can deduct from their 2016 taxes for premiums paid to buy eligible long-term care insurance “includible in the term ‘medical care.’”
As Alison Bell writes in her story on the deductions on ThinkAdvisor’s sister site, LifeHealthPro, the IRS will increase the individual LTCI premium deduction limit a little more for purchasers in their 40s in 2016 than for purchasers in other age groups.
Federal law makes an LTCI deduction available to consumers who have enough medical bills to itemize their medical expenses. To itemize, consumers must have eligible expenses not covered by health insurance that exceed 10% of their AGI.