What 2016 Tax Breaks Did the IRS Expire or Extend?
It seems like every year the tax laws change because they often do! Depending on the actions--or inaction--of Congress, tax breaks change, tax cuts expire, tax rules are rewritten, and dollar amounts are adjusted every year.
What Is a Tax Break?
A tax break reduces your tax liability and may even increase your tax refund. Tax breaks are tax savings resulting from tax deductions, tax credits, exemptions, and other tax incentives.
How Do Changes in Tax Law and Expiring Tax Breaks Affect Me?
Most of these changing tax breaks pertain only to business filers, but there are several that apply directly to individual taxpayers, and those are the tax breaks that we will be highlighting on this page. At efile.com, we will always keep you up to date on the latest tax cuts and tax breaks that affect the individual taxpayer.
What Are Extended Tax Breaks That Can Be Claimed on 2016 Tax Returns?
Congress extended these tax breaks in 2015 so they can be claimed on 2015 and later tax returns:
- Deduction for Charitable Donations from IRAs: Taxpayers age 70 1/2 or older, who may be required to take minimum distributions from their retirement plans or face penalties, may directly donate a certain amount of their IRA funds, tax-free, to qualified charitable organizations. Learn about other charitable tax deductions you may qualify to claim on your tax return.
- Educator Expense Deduction: Eligible educators (K-12 teachers, counselor, aide, or principal who worked in a school for at least 900 hours during the school year) were able to deduct up to $250 of qualified expenses (up to $500 if filing jointly and both spouses were educators) as an adjustment to gross income by claiming the Educator Expense Deduction. Qualified educators may be able to claim their expenses as miscellaneous, itemized deductions (above the $250 limit, but subject to 2% rule).
Tax Breaks That Will Expire on December 31, 2016 (Changes in Effect for Tax Years 2017 and Later)
- Nonbusiness Energy Property Credit (extended in 2015): This tax credit is worth up to 10% of the purchase price of qualified home energy-efficient products between $50 and $500. In order to claim this credit, you must have purchased the qualified improvements and placed them into your existing, primary residence (not a new home) during the year. Learn about the home energy improvements that qualify for the credit.
- Tuition and Fees Deduction (extended in 2015): The Tuition and Fees Tax Deduction is worth up to $4,000 for qualifying tuition and fees you paid for yourself, your spouse, or a dependent. You may deduct any qualified expenses, (tuition, fees, books, supplies, equipment, and other required course materials, but not room and board), even if you paid the expenses with a loan. It's an above-the-line deduction, so you do not need to itemize to claim it on your tax return.
- Residential Energy Property Credit: The Residential Energy Property Credit is worth up to 30% of the total cost of installing renewable energy sources in your home. You can claim this credit for a newly constructed home or a primary residence (except for fuel cells), but you must own the home to qualify for the credit (rentals do not count).
- Alternative Motor Vehicle Tax Credit: The Alternative Motor Vehicle Tax Credit is for new, full-cell motor vehicles (propelled by power from one or more cells converting chemical energy directly into electricity). You can only claim the credit if you are the original purchaser of the vehicle.
- Qualified Plug-In Electric Drive Motor Vehicle Tax Credit: The Qualified Plug-In Electric Drive Motor Vehicle Tax Credit is for new, qualified two-wheeled plug-in electric drive motor vehicles. These vehicles run to a significant extent by an electric motor and draw electricity from a battery capable of being recharged from an external source of electricity.
- Itemized Deduction for Mortgage Interest Insurance Premiums: You can itemize payments for home mortgage interest or insurance premiums.
- Medical Expense Deduction for Individuals Ages 65 and Older (and Spouses): Though the usual Adjusted Gross Income (AGI) percentage is 10%, you can deduct medical expenses above 7.5% of your AGI if you are 65 or older.
Tax Breaks That Expired or Changed on January 1, 2014 (Changes in Effect for Tax Years 2014 and Later)
The tax breaks listed below officially expired on January 1, 2014. This means that you cannot claim these breaks on your 2014 and later Tax Returns.
- Health Coverage Tax Credit (HCTC): If you receive Trade Adjustment Assistance (TAA, ATAA, or RTAA) or Pension Benefit Guaranty Corporation (PBGC) payments, you may qualify for the Health Coverage Tax Credit, which may help you pay up to 72.5% of your health insurance premiums. The HCTC is a refundable credit, so it will be paid to you even if you do not owe any tax at the end of the year. For Tax Year 2013, you must have enrolled into the HCTC program by or on October 1, 2013 in order to qualify for the credit.
Tax Breaks that Expired or Changed on December 31, 2012 (Changes in Effect for Tax Years 2013 and Later)
The tax breaks listed below officially expired on December 31, 2012. This means that you cannot claim these breaks on your 2013 and later Tax Returns.
- Credit for Qualified Plug-in Electric Cars and Hybrids: Though you cannot claim the credit on your 2013 and later Tax Year returns, you may still claim the credit on an amended 2012 tax return if you purchased the car in 2012 and did not claim the credit on your original, accepted 2012 return. However, you can still claim the Alternative Motor Vehicle Tax Credit on your 2016 return if you placed a new and qualified fuel cell vehicle in service during 2016.
- Refundable portion of the Prior-Year Minimum Tax Credit: Though you can still claim the credit on your 2016 Tax Return, you can no longer claim the refundable part of the credit.
Tax Breaks that Expired or Changed on December 31, 2011 (Changes in Effect for Tax Year 2012)
The tax breaks listed below officially expired on December 31, 2011. A number of these tax breaks were retroactively extended or changed by Congress to apply to the 2012 Tax Year, but each of these provisions has already expired under current law.
- Plug-In Vehicle Conversion Credit: If you plan on converting an older car into an electric hybrid, make sure you are doing it to save gas and not to get a tax break. As of 2012, there is no longer a tax credit for converting a non-hybrid car into a plug-in electric hybrid. If you bought a new plug-in electric drive motor vehicle or an alternative motor vehicle, there is still an electric vehicle tax credit available for 2016.
- Adoption Tax Credit Refundability: Adopting a child can be an expensive endeavor. Many adoptive parents have benefited from the Adoption Tax Credit, but it has just become a little less beneficial. Under current law, the Adoption Tax Credit is no longer refundable. So the credit will reduce your tax burden dollar-for-dollar, but it will not be refunded to you if your tax liability has been reduced to $0. However, you can "save" any unused portion of your credit and carry the amount forward for up to 5 years of future tax returns.
- Social Security Taxes: Almost everyone who earns income pays Social Security taxes. Since 2009, Social Security tax has only been paid on the first $106,800 of one's earned income, but in 2012, that number increased. Now, the first $110,100 of earned income is subject to the Social Security tax (this will affect 2016 Tax Returns).
What Tax Breaks Were Extended, Expanded, or Added for Tax Year 2016?
Every year, by law, a number of tax breaks are adjusted for inflation. The following figures will apply to 2016 and later Tax Returns.
- Tax Brackets: The income range has increased for every tax bracket. See the 2016 federal income tax rates.
- Exemptions: Personal and dependent exemptions increased in value from $4,000 to $4,050 for 2016 tax returns.
- Standard Deduction: Your standard deduction amount varies based on your filing status. See the 2016 deduction amounts.
- Earned Income Tax Credit (EITC): The maximum value of the Earned Income Tax Credit has increased. The income limit to qualify for the EITC also increased.
- Education Credits: There are two education tax credits available for 2016 Tax Returns: the refundable American Tax Credit and the Lifetime Learning Credit.
- Education Deductions: There are two education tax deductions available for 2016 Tax Returns: the Student Loan Interest Deduction and the Tuition and Fees Deduction.
- Health Savings Accounts (HSA): The limit on contributions to an Health Savings Account (HSA) have increased to $3,350 for individuals and $6,650 for families (plus $1,000 if age 55 or older by the end of the year).
- Medical Savings Accounts (Archer MSA): The Medical Savings Account (Archer MSA) maximum deductible amount has increased. But so has the minimum amount, as well as the maximum out-of-pocket expense amount.
- Retirement Plan Contributions: The limits on contributions to several types of retirement plans have increased. The limits have increased for 401(k), 403(b), and 457 plans, and for the Thrift Savings Plan. The new contribution limit for each of these plans is now $18,000, plus another $6,000 if you are 50 or older by the end of the year. See all pension plan contribution limits.
- Foreign Earned Income: The maximum Foreign Earned Income Exclusion amount has increased from $100,800 to $101,300.
- Estate Tax: The Estate Tax exemption amount (the amount of inheritance that is protected from the Estate Tax) has increased from $5,340,000 to $5,450,000.
- Premium Tax Credit: The refundable health insurance Premium Tax Credit can be claimed by eligible families and individuals that have low to moderate incomes to help them pay for health insurance purchased through the Health Insurance Marketplace via HealthCare.gov. They can have the credit paid in advance to their insurance company in order to decrease their monthly premium payments or claim all of the credit on on their tax return.
What Are the Expired Tax Breaks Tax Affect Previous Year Tax Returns?
ATTENTION: The following tax deductions and credits can only be claimed on amended tax returns for previous tax years. You cannot claim these tax breaks on your 2016 Tax Return.
Expired Tax Deductions
- The New Vehicle Sales Tax Deduction was eliminated for Tax Years after 2009. If you purchased a new car in 2009 but did not claim it on your 2009 Tax Return, you may qualify to claim it by filing a 2009 tax amendment.
Expired Tax Credits
- The American Recovery & Reinvestment Act of 2009 (ARRA) expired in 2010, but you can file a 2010 tax amendment to claim any of the 2010 credits covered in the Act.
- Though the Car Tax Credit-Cash for Clunkers program ended in 2009, you may be able to claim the car credit on by filing a 2009 amended tax return (if you did not claim it on your 2009 Tax Return), but only if you meet the program's requirements.
- 2010 was the last year the First-Time Homebuyer Tax Credit was available to all taxpayers, so it cannot be claimed on tax returns for later Tax Years. However, you may file an amendment to your 2008, 2009, or 2010 Tax Return to claim the credit (if you purchased a home in 2008, 2009, or 2010).
- There is no Making Work Pay Credit for Tax Years after 2010, but you can claim the credit by amending your 2009 or 2010 Tax Return.
What Can I Do About Changing Tax Breaks?
You can keep up to date on the latest information about what tax breaks are available with efile.com. We will always update our site with the most recent tax law changes.
When you prepare your tax return on efile.com, you don't have to worry about which tax breaks have changed. Efile.com will apply the newest IRS data to your tax return. At efile.com, we guarantee a 100% accurate tax return and the biggest possible tax refund (or lowest tax balance due) allowed by law. Learn more about efile.com's service guarantees.