Vrakas CPAs, Here Are Your Articles for Wednesday, December 21, 2016
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Government Makes Tax-Related Inflation Adjustments

 

More than 50 tax provisions and rate schedules are pegged for annual inflation adjustments and will take effect for tax returns filed in 2018, according to the Internal Revenue Service:

  • The standard deduction for married folks filing jointly rises to $12,700, up $100. For single taxpayers and married individuals filing separately, the standard deduction rises to $6,350 — a $50 increase. For heads of households, the standard deduction will be $9,350, also a $50 boost.
  • The personal exemption remains the same as for 2016: $4,050. The exemption is subject to a phase-out if your adjusted gross income is $261,500, or $313,800 for married couples filing jointly. It phases out completely at $384,000, or $436,300 for married couples filing jointly.
  • The 39.6 percent tax rate affects single taxpayers whose income exceeds $418,400, or $470,700 for married taxpayers filing jointly, up from $415,050 and $466,950, respectively.
  • The limitation for itemized deductions to be claimed on returns of individuals begins with incomes of $287,650 or more, $313,800 for married couples filing jointly.
  • The Alternative Minimum Tax exemption amount is $54,300 and begins to phase out at $120,700. For married couples filing jointly, the tax exemption amount is $84,500. For joint filers, it begins to phase out at $160,900. The 28 percent tax rate applies to folks with taxable incomes above $187,800, or $93,900 for marrieds filing separately.
  • The Earned Income Credit amount is $6,318 for joint filers with three or more qualifying children, up from a total of $6,269 for tax year 2016.
  • The monthly limitation for the qualified transportation fringe benefit is $255, as is the monthly limitation for qualified parking.
  • The dollar amount used to determine the penalty for not maintaining minimum essential health coverage is $695. (This may go up in 2017.)
  • For participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible not less than $2,250 and not more than $3,350 — these amounts haven't changed from 2016. For tax year 2017 participants with family coverage, the floor for the annual deductible is $4,500, up $50. The deductible cannot be more than $6,750, up $50 from the limit for tax year 2016. Also for family coverage, there's an increase of $100 for the out-of-pocket expense limit to $8,250.
  • The adjusted gross income amount for joint filers to determine the reduction in the Lifetime Learning Credit is $112,000 from $111,000.
  • The foreign earned income exclusion is $102,100, up from $101,300.
  • Estates of decedents will have a basic exclusion amount of $5,490,000, which is up from a total of $5,450,000 for 2016. Many taxpayers don't realize how high this number is — it means only a small handful of wealthy decedents will leave an estate subject to the federal estate tax. Note, however, that some states have lower thresholds.

As you can see, many of the tax year 2017 annual inflation adjustments are bulleted above and are part of the more than 50 tax provisions, including the tax rate schedules and other tax changes. Consult with a financial professional to learn how these changes may affect you.

 

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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