• Income tax rates – Range from 10% to 35% unless taxable income exceeds $415,050 for singles or $466,950 for married couples. Rate on income above those amounts is 39.6%.

• Estate & gift tax – Annual tax-free gifts allowed with $14,000 per gift limit. Estate tax exemption of $5,450,000 for 2016 with 40% top tax rate.

• Breaks now permanent – 1) optional deduction for state and local sales tax in lieu of state and local income tax; 2) the $250 deduction for classroom supplies paid by teachers; and 3) IRA-to-charity transfer of up to $100,000 by taxpayers 70½ or older.

• Itemized deductions – Limited for single taxpayers with adjusted gross income (AGI) above $259,400 and married couples with AGI above $311,300.

• Alternative minimum tax – Exemption amount for 2016: $53,900 for singles; $83,800 for married filing jointly.

• Business expensing – Up to $500,000 for new and used equipment and 50% bonus depreciation for new assets.

• Personal exemptions – Phased out for singles with AGI above $259,400 and marrieds with AGI above $311,300.

• Capital gains & dividends – Long-term gains taxed at 15% for most taxpayers. Zero percent for those in 10% and 15% ordinary income brackets; 20% for those in 39.6% ordinary income bracket.

• Medicare tax on earned income – Medicare surtax of 0.9% imposed on wages and self-employment income exceeding $200,000 for singles and $250,000 for married couples.

• Net investment income tax – A 3.8% tax imposed on unearned income for singles with modified AGI exceeding $200,000 and for couples with modified AGI exceeding $250,000.

NOTE: This newsletter is issued annually to provide you with information about minimizing your taxes. Do not apply this general information to your specific situation without additional details. Be aware that the tax laws contain varying effective dates and numerous limitations and exceptions that cannot be summarized easily. For details and guidance in applying the tax rules to your individual circumstances, please contact us.

–Next: Part II – Create a Tax-Saving Plan to Reduce Your 2016 Tax Bill—

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