Wednesday, March 23, 2016

2016 Tax Changes You Need to Know

By Nick Bates, Vice President of Annuity Sales

Every year, Annuity News & Lifelines tries to keep our readers informed on some of the latest tax changes that may affect what you are discussing with your clients. As you sit with your clients over the next couple months, there are several key changes that you should have in mind.

Contribution limits for certain retirement vehicles have increased for the tax year 2016, according to the IRS in IR-2015-118, October 21, 2015:
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $184,000 and $194,000, up from $183,000 and $193,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $184,000 to $194,000 for married couples filing jointly, up from $183,000 to $193,000. For singles and heads of household, the income phase-out range is $117,000 to $132,000, up from $116,000 to $131,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,500 for married couples filing jointly, up from $61,000; $46,125 for heads of household, up from $45,750; and $30,750 for married individuals filing separately and for singles, up from $30,500.[1]

These changes may give you the opportunity to talk to your clients about potentially increasing the amount they are saving for retirement, or perhaps to suggest that your client speak with their tax advisor to find out if they may qualify to make a Roth IRA contribution in 2016. Along with the above changes, the 2016 tax brackets have been adjusted as well:

For 2016, all the brackets were increased slightly for inflation. For example, the top bracket for individual filers was increased to $415,051 and for married filers to $466,950.

Estate taxes changed a bit in 2016 as well. For 2016, the first $5,450,000 of value in an estate is exempt from federal estate tax ($5,430,000 for 2015).[3] Estates are taxed at a maximum rate of 40%. 

In addition, portability between couples still applies if elected. Portability means the executor of the estate of the first spouse to die can transfer the deceased spouse’s unused estate tax exemption to the surviving spouse. This may give you the opportunity to discuss with your clients tax-efficient ways to transfer assets to their beneficiaries.

Keep these changes in mind as you are meeting with your clients prior to April 15th. Of course, you should always encourage your clients to consult with a qualified tax professional to fully understand how these and other changes may impact them before any decisions are made on a tax-efficient plan. If you have any questions how Ann Arbor Annuity Exchange can help you during this time, please call us at 800.321.3924 and ask to speak with a marketer. We have several different tax kits available that can give you ideas on how to help your clients at this most stressful time of year.

Nick Bates | Vice President of Annuity Sales
Ph: 800.321.3924 x121 | Dir: 734.786.6121


Ann Arbor Annuity Exchange and its representatives do not give tax or legal advice. Please consult your tax advisor or attorney.

[1] “IRS Announces 2016 Pension Plan Limitations; 401(k) Contribution Limit Remains Unchanged at $18,000 for 2016” (IR-2015-118) IRS. 21 Oct 2015. Web. Accessed on 21 Jan 2016 at$18,000-for-2016
[2] Phillips Erb, Kelly. “IRS Announces 2016 Tax Rates, Standard Deductions, Exemption Amounts and More” Forbes. 21 Oct 2015. Web. Accessed on 21 Jan 2016 at
[3] “What’s New - Estate and Gift Tax” IRS. 2 Dec 2015. Web. Accessed on 21 Jan 2016 at 

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