2017 Tax Season

Preparing for 2017 Taxes

Although most Americans will not have to worry about 2017 taxes until early 2018 when 2017 tax returns are due, self-employed individuals or anyone who must pay quarterly tax payments will want to plan ahead.

The following is a summary of the key changes for 2017.

  • 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 listed below (and described in the revenue procedure).
  • The standard deduction rises $50 for tax year 2017:   to $6,350 for singles and married persons filing separate returns, $12,700 for married couples filing jointly, and $9,350 for heads of household.
  • The limitation on itemized deductions to be claimed on tax year 2017 returns of individuals begins with incomes of $261,500 or more ($313,800 for married couples filing jointly).
  • The personal exemption for tax year 2017 remains the same. However, the exemption is subject to a slight phase-out increase. This begins with adjusted gross incomes of $261,500 for single filers ($313,800 for married couples filing jointly). It phases out completely at $384,000 ($436,300 for married couples filing jointly.)
  • The Alternative Minimum Tax exemption amount for tax year 2017 is $54,300 for single filers ($84,500 for MFJ) and begins to phase out at $120,700 ($80,450, 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 tax year 2017, the monthly limitation for the qualified transportation and parking fringe benefit remains unchanged at $255.
  • The Standard mileage rate is $0.535 a mile for business use of a vehicle.
  • For tax year 2017 Health Saving Account contributions rise $50 to $3,400 for individuals and $6,750 for family plans.
  • For tax year 2017, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is unchanged at $110,000 and completely phases out at $130,000.
  • 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. So, a married couple’s allowance is $10.98 million (combined) from federal estate and gift taxes.  The annual gift exclusion remains at $14,000 per individual for 2017.

Below is a list of changes to 2017 income tax rates. As you will note the highest federal income tax rate is 39.5 which is almost 5% higher than the maximum was back in 2012.  Fortunately, (or unfortunately) most people won’t reach that rate (or notice much of a change from prior year). However, it doesn’t hurt to strive for that level of income.

 

The 2017 Federal Income Tax Brackets:              

Tax Bracket           Married Filing Jointly      Single
10% Bracket ———- $0—$18,650 ———- $0—$9,325
15% Bracket ———- $18,650—$75,900 ———- $9,326—$37,950
25% Bracket ———- $75,900—$153,100 ———- $37,950—$91,900
28% Bracket ———- $153,100—$233,350 ———- $91,900—$191,650
33% Bracket ———- $233,350—$416,700 ———- $191,650—$ 416,700
35% Bracket ———- $416,700—$470,700 ———- $416,700—$418,400
39.6% Bracket ———- $470,700 & above ———- $418,400 & above

 

(Prior Year) 2016 Federal Income Tax Brackets:

Tax Bracket           Married Filing Jointly                 Single
10% Bracket ———- $0—$18,550 ———- $0—$9,275
15% Bracket ———- $18,550—$75,300 ———- $9,276—$37,650
25% Bracket ———- $75,300—$151,900 ———- $37,650—$91,150
28% Bracket ———- $151,900—$231,450 ———- $91,150—$190,150
33% Bracket ———- $231,450—$413,350 ———- $190,150—$ 413,350
35% Bracket ———- $413,350—$466,950 ———- $413,350—$415,050
39.6% Bracket ———- $466,950 & above ———- $415,050 & above

 

Please feel free to contact Santa Barbara Tax and Accounting Services with any questions regarding your 2017 tax filings.