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2017 Tax Year Changes

2017 starts with one set of tax rules… But we expect there will be major changes with President Trump in office. For now, we’ll note major changes in place for 2017 to look out for.

Business Taxes:

The standard mileage rate for business driving has changed in 2017, it falls to 53 ½¢ a mile, a 0.5¢ drop. Traveling for medical purposes and job-related moves the rate decreases to 17¢ a mile. For the charitable driving the rate remains at 14¢ a mile.

Two business tax breaks first apply on 2016 returns: Small start-up businesses can opt to claim $250,000 of R&D costs to offset payroll taxes instead of their regular income tax ability. The next tax break is businesses that hire the long-term unemployed get a tax credit. The work opportunity tax credit is expanded to cover employers that have hired people that have been unemployed for 27 weeks or more and had received unemployment benefits.

Individual Returns:

The 2017 standard deductions have raised. Married couples get $12,700, plus $1,250 for each spouse age 65 or older. Singles are able to claim $6,350 or $7,900 if 65 or older. Head of Household get $9,350, plus $1,550 once they are 65 years old.

High-incomers lose the ability to itemize deductions starting at a higher level in 2017. Their write-offs are slashed by 3% of the excess of AGI over $261,500 for singles, $287,650 for head of household and $313,800 for married. But the reduction can’t rise above 80% of itemizations.

Personal exemptions are to stay at $4,050 for filers and their dependents in 2017. However, this tax break is not to be included for upper-incomers.

Minimum Tax:

Alternative Minimum Tax exemptions go up for 2017. They raise to $84,500 for couples and $54,300 for both singles and heads of household.

Social Security:

The base for Social Security wages increases in 2017 to $127,200, up $8,700 from 2016’s cap. But the Social Security tax rate on employers and employees remains at 6.2%. Social Security recipients will see an insignificant 0.3% hike in their benefits in 2017. People who are turning 66 years old in 2017 don’t lose any benefits if they earn $44,880 or less before they reach that age. There is no earnings cap once a beneficiary turns 66. The earnings amount needed to qualify for a quarter of coverage climbs to $1,300 a quarter.

Health Care:

The income levels to qualify for the health premium credit in 2017 go up. It is available for filers with their household income ranging from 100% to 400% of the federal poverty level or for singles their income ranging from $11,880 to $47,520 and $24,300 to $97,200 for a family of four.

Medicals: 

For annual cap on deductions contributions to HSAs rises to $3,400 in 2017 but for self-only coverage. The top for account owners with family coverage remains at $6,750. Individuals that are born before 1963 can contribute an additional $1,000. Minimum policy deductibles stay at $2,600 for families and $1,300 for singles.

Starting with 2017 returns filed in 2018, the threshold for deducting medical expenses on Schedule A will be raised to 10% of AGI for taxpayers who are age 65 or older.

Estate and Gift Tax:

For 2017 the estate and gift tax exemption increases to $5,490,000. The gift tax exclusion stays the same, $14,000 per recipient. For farm or business realty, up to $1,120,000, can receive discount estate tax valuation.

Savings Plan:

Most key dollar ceilings for retirement plans are not changing in 2017. People that are born before 1968 can put $6,000 more into their 401(k). For the defined contributions plans the pay-in limit goes up to $54,000. Contributions for retirement plan can be based on up to $270,000 of salary.

The limits for pay-in for IRAs and Roth IRAs in 2017 are staying constant at $5,500, plus $1,000 as an additional catch-up contribution for taxpayers age 50 and up. In 2017, deductions phase-out’s for IRAs start at higher levels, from $99,000 to $119,000 of AGI for couples and from $62,000 to $72,000 for singles.

Expired Breaks:

Among the bundle of individual and business tax breaks that have expired January 1st: Having up to $2 million of foreign debt on primary residence.

  • Getting the credit for installing energy-efficient windows and exterior doors in a home.  The credit of 30% for geothermal heat pumps, wind turbines and fuel cell property.
  • Being able to write-off private mortgage insurance premiums.
  • Getting a credit for two-wheeled electric vehicles and biodiesel or alternative fuels.

There is no assurance that lawmakers will continue these provisions in 2017. As always, we will be here to keep you up to date on all the changes that occur.

Written by Nicole M. Albrecht

Nicole Albrecht may be reached at (951) 719-1515 or Nicole@thinkfas.com.

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