Tax Update for 2016

The Social Security Administration announced that the maximum earnings subject to the Social Security component of the FICA tax will remain at $118,500 for 2016.  The Medicare component will remain at 1.45% of all earnings, and individuals with earned income of more than $200,000 ($250,000 fot married couples) will pay an additional 0.9% in additional Medicare taxes. 

IRS limits the amount that employees can deposit into a 401(k) plan each year.  A participant’s maximum pre-tax contribution for 2016 will remain at $18,000.  An additional $6,000 catch-up adjustment can be contributed for individuals who will be at least age 50 by the end of the year.

Corporation and S Corporation income tax returns are due by March 15, 2016.  This is also the last day for corporations to file Form 7004, an automatic six-month extension for 2015 corporate tax returns.  Individual income tax returns are due on April 18th this year.  This is also the last day for individuals to file Form 4868, an automatic six-month extension for individual income tax returns.  April 18th is also that last day to make IRA contributions.

The dollar limit for Code Sec. 179 expensing had previously reverted to $25,000 during 2015.  Now the Code Sec. 179 expensing limit is permanently set at $500,000.  Also made permanent is the special rule allowing off-the-shelf computer software to be treated as Code Sec. 179 property.

Matthew R. Horowitz, C.P.A.
410-312-7622 • email
10015 Old Columbia Rd. Suite B-215, Columbia, Maryland 21046