IRS Announces 2017 Tax Rates, Standard Deductions, Exemption Amounts And More...

The Internal Revenue Service (IRS) has announced the annual inflation adjustments for a number of provisions for the year 2017, including tax rate schedules, tax tables, and cost-of-living adjustments for certain tax items.

These are the applicable numbers for the tax year 2017 - in other words, effective January 1, 2017. They are NOT the numbers and tax rates that you’ll use to prepare your 2016 tax returns in 2017. Rather, these numbers and tax rates are those you’ll use to prepare your 2017 tax returns in 2018 and will assist you in your 2017 tax and financial planning.  See the adjustments below.

    The standard deduction for married filing jointly rises to $12,700 for tax year 2017, up $100 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $6,350 in 2017, up from $6,300 in 2016, and for heads of households, the standard deduction will be $9,350 for tax year 2017, up from $9,300 for tax year 2016.              

•   The personal exemption for tax year 2017 remains as it was for 2016: $4,050. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $261,500 ($313,800 for married couples filing jointly). It phases out completely at $384,000 ($436,300 for married couples filing jointly.)

    For tax year 2017, the 39.6 percent tax rate affects single taxpayers whose income exceeds $418,400 ($470,700 for married taxpayers filing jointly), up from $415,050 and $466,950, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds for tax year 2017 are described in the revenue procedure.

    The limitation for itemized deductions to be claimed on tax year 2017 returns of individuals begins with incomes of $287,650 or more ($313,800 for married couples filing jointly).

    The Alternative Minimum Tax exemption amount for tax year 2017 is $54,300 and begins to phase out at $120,700 ($84,500, for married couples filing jointly for whom the exemption begins to phase out at $160,900). The 2016 exemption amount was $53,900 ($83,800 for married couples filing jointly). For tax year 2017, the 28 percent tax rate applies to taxpayers with taxable incomes above $187,800 ($93,900 for married individuals filing separately).

    The tax year 2017 maximum Earned Income Credit amount is $6,318 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,269 for tax year 2016. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.

    For calendar year 2017, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is $695.

    For tax year 2017 participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,250 but not more than $3,350; these amounts remain unchanged from 2016.

Hope this information is useful for your 2017 tax planning. No one likes surprises so make sure your tax planning supports your overall financial goals. If you need assistance with tax planning for your business or personal finances, feel free to contact me.  I would be happy to assist.  

Smooches!

Keisha