It is hard to believe that we are just two months away from the year of 2016 and as always towards the end of each calendar year the IRS announces next year’s annual inflation adjustments. You can check for more than 50 tax provisions, including the tax rate schedules, and other tax changes for tax year 2017 in Revenue Procedure 2016-55. The tax year 2017 adjustments generally are used on tax returns filed in 2018.
The tax items for tax year 2017 of greatest interest to most taxpayers include the following dollar amounts:
- 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% 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% 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 tax year 2017, the monthly limitation for the qualified transportation fringe benefit is $255, as is the monthly limitation for qualified parking,
- 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. For self-only coverage the maximum out of pocket expense amount is $4,500, up $50 from 2016. For tax year 2017 participants with family coverage, the floor for the annual deductible is $4,500, up from $4,450 in 2016, however the deductible cannot be more than $6,750, up $50 from the limit for tax year 2016. For family coverage, the out of pocket expense limit is $8,250 for tax year 2017, an increase of $100 from tax year 2016.
- For tax year 2017, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $112,000, up from $111,000 for tax year 2016.
- For tax year 2017, the foreign earned income exclusion is $102,100, up from $101,300 for tax year 2016.
- Estates of decedents who die during 2017 have a basic exclusion amount of $5,490,000, up from a total of $5,450,000 for estates of decedents who died in 2016.
What Should You Do?
If you are self-employed or earn income from sources where taxes are not being withheld, you will want to make sure you get with your tax preparer or other tax professional before the end of 2016 to make sure that you have paid in enough in estimated taxes or withholding taxes so that you will not have a balance due when it comes time to file your 2016 tax return. Filing a tax return with a balance due could subject you to a penalty.
Also by meeting with your tax professional now to project your tax liability for 2016, you need not worry about the year-end holidays interfering with your meeting and it gives you the extra time to gather the funds needed to pay any expected deficiency as well as to keep up with the constant change in tax laws to make sure that you receive all the benefits you are entitled to minimize your tax obligations
Let the tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. with locations that include Newport Beach, San Diego, San Francisco and San Jose help you accomplish this.