By Patrick B.
It’s tax filing season, which means, if you’re like me, you’re busy trying to pull together all of your W-2s, 1099s, etc., and probably have not begun thinking about your 2017 taxes. Every year, the IRS makes changes to the tax code. Sometimes this is a big change like releasing new rules, and sometimes it’s an adjustment for inflation. Either way, it can affect our upcoming tax return. Here are five updates to the 2017 tax code you should keep in mind throughout the year.
- The tax brackets have been adjusted for inflation. So, if you made $37,950 in 2016 and filed as single, you were in the 25 percent tax rate bracket. In 2017, filing with the same income and marital status would put you in the 15 percent tax rate bracket instead. Although these changes won’t affect most filers, it could be significant if your income is on the border between tax brackets.
- The standard deduction will increase slightly, which might reduce your tax liability. Individual filers and heads of household will receive about a $50 increase to the standard deduction of $6,350 and $9,350 respectively. Couples filing jointly will receive a $100 increase to $12,700 in 2017.
- Medical expense deductions will change for taxpayers 65 and older. In 2016, taxpayers 65 and older only needed their medical expenses to surpass 7.5 percent of their adjusted gross income (AGI) to receive a deduction. Beginning in 2017, they will need to reach the same 10 percent of their AGI to claim itemized medical expenses that the rest of us tax filers do.
- Traditional and Roth IRA phase-outs will be increased.
- Single taxpayers earning $62,000 to $72,000 and married couples filing jointly with an income between $99,000 and $119,000 will be subject to a tiered scale for deductions they receive for Traditional IRA contributions. Make more than the maximum range? Sorry, you’re no longer eligible to receive tax deductions for Traditional IRA Contributions.
- As for the Roth IRA, single filers making between $118,000 to $133,000 and married couples making between $186,000 to $196,000 will be
subject to tiered contribution limits that decreases until you can no longer contribute to a Roth IRA.
- The estate tax exemption is increasing nationally as well 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. The rules get more complicated for married couples, so be sure to consult your tax advisor.
Back to your 2016 taxes. Are you ready to file? As a member, you can receive a discount on your TurboTax service. Log in to your account at ArizonaFederal.org and click the link to get started!
This article is not intended as tax advice. Contact your tax advisor for assistance.
* Source: The Motley Fool