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IRS Announces Estate and Gift Tax Exclusions for 2016

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The IRS has released the annual inflation adjustments and tax rate schedules that will apply in 2016. Included are the new gift and estate tax exclusion amounts for 2016. The new inflation adjusted numbers are available in Revenue Procedure 2015-53. They apply generally to transactions or events occurring in calendar year 2016

Estate and Gift Tax Exclusion amounts for 2016

$5.45 million – Federal Estate Tax Basic Exclusion Amount

$5.45 million – Lifetime Gift Tax Exclusion

$14,000 – Annual Gift Tax Exclusion

The new estate and lifetime gift tax exclusion amounts are an increase of $20,000 from 2015. Because a husband and wife each get their own exemption, a married couple can give away $10,900,000 million tax-free in 2016 (provided they have not previously used up any of their exclusions.)

The top tax rate on amounts above the exemption limit is 40%. The high exemption amounts have pretty much done away with estate tax as an estate planning consideration for most people..

Income Tax Brackets for 2016

The top federal income tax rate of 39.6 percent will affect singles whose income exceeds $415,050 and married couples filing jointly with incomes over $466,950 in 2016. The other marginal rates are described in the Revenue Procedure.

Standard Deduction Amounts for 2016

$6,300               Standard deduction for single taxpayers

$12,600             Standard deduction for married couples

$9,300               Standard deduction for heads of households

$1,250               Additional standard deduction for the aged or blind. (This additional standard deduction amount is increased to $1,550 if the individual is also unmarried and not a surviving spouse.)

Long-Term Care Insurance Deduction Limits for 2016

The IRS also released the long term care insurance premium deduction limitations for 2016:

Attained Age                                         Premium Limit

40 or less                                                    $390

More than 40 but not more than 50     $730

More than 50 but not more than 60     $1,460

More than 60 but not more than 70     $3,900

More than 70                                            $4,870