Tax Tips

A guide to one retirement savings plan option.

In November 2015, the Treasury Department launched myRA. This is a safe, simple and affordable way to open a starter retirement account for those who do not have access to an employer-sponsored retirement plan.

Following are a few facts that will help you determine whether myRA is right for you:

  • Accounts are open to those who have annual earned income below $132,000 if single, head of household, or married filing separately, or $194,000 if married filing jointly.
  • Account owners can save up to $15,000 over a period of 30 years. Once this limit is reached, savings will have to be rolled over to a Roth IRA.
  • An account will earn interest at the same variable rate available to federal employees for their retirement accounts and follow the same rules as a Roth IRA.
  • Accounts are portable and not tied to a single employer, meaning if you switch jobs, you can continue to contribute to your myRA account.
  • Opening a myRA account costs nothing, and you can contribute an amount that fits your budget, as long as it’s within contribution limits (individuals can contribute up to $5,500 to all of their IRAs).
  • Account owners can withdraw contributions without paying tax and penalties.
  • Like a savings bond, plan funds can’t lose value and will increase over time.

Participants can fund their accounts through a:

  • Payroll deduction. Set up automatic direct deposit contributions through an employer.
  • Checking or savings account. Fund directly by setting up recurring or one-time contributions from a checking or savings account.
  • Federal tax refund. Direct all or a portion of a federal tax refund to your myRA account.
For more information on opening a myRA account, visit myRA.gov.

Life just got easier for certain small business owners

The IRS simplified the paperwork and record-keeping requirements for small businesses by raising the safe harbor threshold for deducting certain capital items from $500 to $2,500. This change affects businesses that do not maintain an applicable financial statement (i.e., audited financial statement). It applies to amounts spent to acquire, produce or improve tangible property that would normally qualify as a capital item.

The new $2,500 threshold applies to any such item substantiated by an invoice. As a result, small businesses will be able to immediately deduct many expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions. The new $2,500 threshold takes effect starting with tax year 2016. In addition, the IRS will provide audit protection to eligible businesses by not challenging use of the new $2,500 threshold in tax years prior to 2016.

If you have an applicable financial statement, the de minimis or small-dollar threshold remains $5,000.

  1. The standard deduction remains at $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly. The standard deduction for heads of household rises to $9,300.
  2. The limitation for claiming itemized deductions on 2016 individual returns begins with incomes of $259,400 or more ($311,300 for married filing jointly; $285,350 for heads of household; and $155,650 for married filing separately).
  3. The personal exemption for tax year 2016 rises to $4,050, up from $4,000 for tax year 2015.
  4. The annual exclusion for gifts remains at $14,000 for 2016.
  5. For 2016, the maximum earned income credit is $506 for taxpayers with no children; $3,373 for taxpayers with one child; $5,572 for taxpayers with two children; and $6,269 for taxpayers with three or more children.
  6. The standard mileage rate for medical and moving purposes decreased to 19¢ per mile for 2016.