I'm gonna go with the most popular choice thus far and also state that 1996 was the best year of Shawn Michaels' illustrious career.
This was the year that Shawn Michaels became a permanent main eventer, and really the only year in entire tenure with the WWE in which he was the main focus of the company. Since 1996, he's been "a focal point" of the company, but it was only in 1996 when he was clearly at the top. By 1997 Shawn was at the top but Undertaker was also at his peak as the champion throughout most of the year, Bret Hart was arguably the top heel until the very of 1997, and Stone Cold was on the rise. And since his return in 2002, he was never again the major focal point (ala Brock Lesnar, Triple H, John Cena, Batista, etc.)
Let's go over his accomplishments through the year.
1. Starts off the year on a tremendous comeback angle (from his collapse on Raw a few months before and his possible retirement from it) winning his 2nd Royal Rumble and earning the Wrestlemania titleshot.
2. Fights Owen Hart in a forgotten classic at the Feb. In Your House ppv event.
3. Participate in his 2nd Wrestlemania event in what many people consider to be the greatest match in Wrestlemania history (at least until his matches with Taker at 25 and 26) in the Iron Man Match with Bret Hart. He engages in the most memorable entrance in Wrestlemania history and wins the WWF title, in what is easily his greatest reign as champion. And while I don't think it's the best match in Wrestlemania history. It's a top 5 match I'd say. One of the best ever.
4. Participates in a classic No Holds Barred match with Diesel in what is basically Kevin Nash's swan song for the WWF at his peak.
5. Has two back to back matches with the British Bulldog in a great fued with some very overlooked matches.
6. Faces Vader in another great matchup from Summerslam 96 in what was essentially a dream matchup at the time.
7. Then participates in one of the best matches of all-time (and I still say this even with all of the classics that HBK was in during the 2000's decade) with Mick Foley at In Your House: Mind Games. A very innovative, groundbreaking, and brilliant matchup. The best match of Mick Foley's career, and yeah one of HBK's very best as well.
8. Helps change the landscape of WWE with the crowd turning on him at the 1996 Survivor Series in his championship loss to Sid. This was one of the first times that the crowd went against the promotion and marketing of the WWF by basically cheering for Sid over HBK. Even before the crowd turned on Bret Hart for Stone Cold.
1996 was clearly Shawn Michaels' year in the WWF, and he was clearly the top guy in the company, as Bret Hart was only around for the first few months (January-March) and at the very end (November and December), and the Undertaker was mainly in what was then a mid-card feud with Mankind (though it was definitely the best feud of the year until the Austin/Hart rivalry began at the end). Shawn Michaels was clearly at the top, and there was no other year in HBK's career where he dominated the WWE landscape like he did in this year.
1996 is the best year of his career undoubtedly.