Certified Public Accountant Serving the Following Cities and Counties with Accounting and Financial Needs: DeLaney & Co., Certified Public Accountants: serves clients in Lancaster serves clients from the cities of Lancaster, Columbus, Pickerington, Bremen, Amanda, Baltimore, Carroll, Lithopolis, Canal Winchester, Logan, Nelsonville, Zanesville, Athens, Chillicothe, Newark, Heath, Pataskala, from Fairfield County, Franklin County, Perry County, Licking County, Athens County, Ross County, Hocking County, Muskingum County, Pickaway County in Ohio.
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Lancaster, Ohio 43130
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TAX TIP: 2017 TAX INFORMATION
5 Tax Changes for 2017
You'll Want to Know About
Find out how these changes could impact your tax liability in the upcoming year.
Tax planning isn't something most Americans want to think about as we head into the
holidays, but having a year-round plan that takes into account the various tax laws can save you a lot of hassle and a little green come tax time. It can be especially helpful when considering that roughly 80% of all taxpayers wind up receiving a refund from the federal government.
However, what you know about the U.S. tax code may be changing in the upcoming year. Just a few weeks ago the Internal Revenue Service released its tax changes for 2017, and there are quite a few updates you'll want to be aware of.
But before we dive into what's different in 2017, keep in mind that the tax changes for 2017 aren't pertinent to the taxes you'll file in the coming months for fiscal 2016. The tax changes for 2017 pertain to the tax preparation you'll do in 2018 for calendar year 2017, so don't confuse the two.
1. Tax brackets will be adjusted for inflation
The big change, obviously, is that the individual income tax brackets have been adjusted for inflation. The good news is that inflation has been nominal, meaning there wasn't a large shift upwards in the tax schedule.
Here's what the 2016 tax bracket looks like now (the bracket you'll be using when preparing your taxes in a few months):
DATA SOURCE: IRS. TABLE BY AUTHOR
And here's the 2017 tax bracket:
DATA SOURCE: IRS. TABLE BY AUTHOR
You'll note the differences are very minute, meaning you probably won't need to make any year-over-year tax changes unless you expect significant changes in your salary or a large bonus. Inflation tends to dictate tax bracket changes, and we've been trending well below the long-term average for inflation for many years.
2. Standard deductions will increased
Here's some good news from the IRS: Your standard deduction will go up a smidge in 2017. Individual filers and heads of household will receive a standard deduction of $6,350 and $9,350, respectively, in 2017, up $50 from 2016. Couples filing jointly get a $100 year-over-year lift to $12,700 in 2017. Although this change isn't liable to put a lot of extra money in your pocket, anything that can reduce your tax liability without having to lift a finger is good news.
3. Traditional and Roth IRA phase-outs will be adjusted higher
Among the various retirement tools at your disposal, the traditional IRA is among the most popular. Traditional IRAs are tax-deferred accounts, meaning you'll pay tax once you begin making withdrawals during retirement. But, they can also provide an ancillary benefit of lowering your current-year tax liability. In 2017, the phase-out range for taking this deduction increases $1,000 to $62,000 to $72,000 for single taxpayers, and $99,000 to $119,000 for married couples filing jointly.
For those of you investing with a Roth IRA -- a retirement account with no upfront tax deduction, but which has the ability to grow tax-free for life -- the individual phase-out to be able to contribute rose $1,000 for single filers to a range of $118,000 to $133,000, while it jumped $2,000 for married couples filing jointly to a range of $186,000 to $196,000. In other words, a few extra people should be able to contribute to a traditional or Roth IRA in 2017 because of these modest increases.
4. Medical expense deductions will change for certain seniors
Another tax change in 2017 relates to itemizing your medical expenses with the hope of deducting them.
For the vast majority of Americans in 2016, your medical expenses would have had to surpass 10% of your adjusted gross income (AGI) before you could take a deduction. However, taxpayers 65 and older are able to use a previous threshold of just 7.5% of their AGI when itemizing and taking a deduction in 2016. Beginning in 2017, everyone is on the same playing field. If you're 65 and older, your medical expenses will have to top 10% of your AGI before you can claim itemized medical expenses.
5. The estate tax exemption will increase (slightly)
Finally, for those of you who've been diligent long-term investors or perhaps think of yourselves as barons, the estate tax exemption is increasing modestly in 2017. Estates of individual decedents who pass away in 2017 will be exempt up to $5.49 million, a $40,000 increase from 2016 levels. Estate taxes generally affect a small swath of the population, but that hasn't stopped President-elect Donald Trump from suggesting that they should be scrapped in their entirety.
The $15,834 Social Security bonus most retirees completely overlook
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