Pat A Kimmer, CPA P.C.

Pat A Kimmer, CPA P.C.




2017 Tax News Summary

TAX NEWS SUMMARY FOR 2017

EMPLOYMENT TAXES:

·        Social security wage base for 2017 is $127,200

·        Additional .9% Medicare tax on wages and income from self-employment applies on singles earning over $200,000; married filing joint over $250,000; MFS over $125,000.  Employers will withhold the additional .9% when employee’s wages exceed $200,000.  Married individuals earning less than $200,000 but with combined wages to exceed $250,000 should voluntarily have more Federal tax withheld.

TAX CALCULATIONS:

·        Inflation adjustments are made annually to the income tax tables, deductions, many tax credits and other items to include:

Standard deduction for 2017 for joint filers $12,700; $9,350 Heads of households; $6,350 for singles and married filing separate (add $1,250 for age 65 or older, or blind; add $1,550 if age 65 or older, or blind and unmarried and not a surviving spouse)

Personal exemption is $4,000 (phaseout starts with Single AGI's $258,250, Head of Households $284,050, Married Joint $309,900, Married Filing Separate $154,950)

Cafeteria Plan contributions for voluntary employee salary reductions to health flexible spending arrangements is limited to $2,550.

Kiddie Tax (unearned income of minor children taxed as if parent's income) kicks in at $1,050

·      Tax brackets for 2017 are at the same rates as in 2016 at 10%, 15%, 25%, 28%, 33%, 35% and 39.6% with updated levels of taxable income in each bracket and with the highest bracket kicking in at over $418,400 (singles), $444,550 (head-of-household status), $470,700 (married filing joint/surviving spouses), $235,350 (married filing separately)

·       Tax Rate on Qualified Dividends and Net Capital Gain maximum tax rate of 15% (0% for taxpayers in 10%-15% tax brackets) and a higher rate of 20% for filers with income in excess of $418,400 (singles), $444,550 (head-of-households) and $470,700 (married filing joint)

·       Phaseout for itemized deductions /personal exemptions applicable in 2017 for filers over $261,500 (single); $287,650 (head-of-households), $313,800 (married filing joint filers) and $156,900 (married filing separate)

·        AMT (Alternative Minimum Tax) is permanently indexed for inflation; 2017 exemption amounts are $84,500 (MFJ,Surviving Spouse), $54,300 (HH and Single), $42,250 (MFS), $24,100 (Estates/trusts)  AMT rate is 28%.

·       3.8% Medicare surtax applies on unearned income for joint filers with adjusted gross income over $250,000 and singles above $200,000, married filing separate at $125,000.  Surtax applies on the lower of net investment income (interest, dividends, capital gains, passive rental income) or excess of modified adjusted gross income over the listed thresholds.  On home sales for gains in excess of the home exclusion amounts for those filers.

RETIREMENT PLAN CONTRIBUTION LIMITS:

·        Elective deferral contribution limit for employees participating in 401(k), 403(b) or 457(b) plans remains at $18,000 for 2017.  The catch-up contribution is $6,000 for those individuals age 50 and over.

·        IRA annual contribution limit remains at $5,500 (catch-up contributions for age 50 and over remains at $1,000);  phase out range limit for singles and head of households change to modified AGI of  $61,000-$71,000; Joint filers to $98,000-$118,000 for spouse covered by a work retirement plan and contributor not covered at work to $183,000-$193,000; for married filing separate individuals covered by a workplace plan AGI of $0 to $10,000.

TAX CREDIT BENEFITS:

·        Additional child tax credit of $1,000 available through 2017. Up to $3,000 may be refundable.

·        Child and dependent care credit  is calculated on up to $3,000 of expenses for one dependent or up to $6,000 for more

-      Adoption Credit of up to $13,570 on the amount of qualified adoption expenses (phaseout begins with AGI over $203,540)

-     Earned Income Credit maximums are $503 (no children), $3,359 (1 child), $5,548 (2), $6,318 (3 or more)

·       American opportunity tax credit is $2,000 plus 25% of the next $2,000 for a maximum credit of $2,500 for qualified college tuition and related expenses with limitations for modified adjusted gross income over $80,000 ($160,000 joint return).

-       Refundable Credit for Coverage Under a Qualified Health Plan limitation for excess advance credit payments is limited to $300 (Single) $600 (all others) if household income (as a percent of poverty line) is less than 200%; $750 (Single) $1,500 (others) between 200%-299%; $1,250 (Single) $2,500 (Others) between 300%-399%.

    

BUSINESS TAX PROVISIONS:

·      Section 179 Expensing limitation for 2017 is $500,000 with phase out with $2 million of assets placed in service

ESTATE AND GIFT TAX PROVISIONS:

·        Annual Gift Tax exclusion remains at $14,000 per year per recipient

·        Estate and gift lifetime exclusion (Unified Credit against estate tax) for decedents dying during calendar year 2015 is $5,490,000.