2017 Tax Highlights
TAX CHANGES FOR 2017
Below are some of the highlights that may affect the preparation of your tax returns:
1) PERSONAL EXEMPTIONS - Have been increased to $4,050. The deduction will be reduced or eliminated for higher income taxpayers.
2) STANDARD DEDUCTION -
3) PAYROLL TAXES - The wage ceiling on which Social Security is taxed for 2017 is $127,200. For 2018 the ceiling increases to $128,400. Medicare tax is unlimited, but workers earning more than $200,000 (or couples earning more than $250,000) will have an additional 0.9 percent withheld.
4) TAX RATES - Have remained the same, ranging from a low of 10% to a high of 39.6%. If your income is more than $418,400 (single) or $470,700 (married filing jointly) your tax bracket will be 39.6 percent. If you are in the top tax bracket, you will also be subject to a capital gains rate of 20 percent as well as a 3.8 percent surcharge tax on investment income for the Affordable Care Act.
5) CHILD TAX CREDIT - Remains the same at $1,000 for each qualifying child younger than 17. The deduction may be reduced or eliminated for higher income taxpayers.
6) STANDARD BUSINESS MILEAGE RATE - The rate for 2017 was 53.5 cents per mile. The rate for 2018 is 54.5 cents per mile.
7) 401(K) CONTRIBUTION LIMIT – Was $18,000 for 2017. This will increase for 2018 to $18,500. Individuals who attained age 50 by the end of the tax year 2017 are allowed an additional “catch-up” contribution of $6,000 and will remain the same for 2018.
8) SELF-EMPLOYED PLANS (SEP’S) - The lesser of 25% of a special computation used in determining the earned income of the self-employed individual or $54,000 for 2017 and for 2018 $55,000.
9) TRADITIONAL & ROTH IRA CONTRIBUTIONS - There is a $5,500 maximum annual contribution. Individuals 50 or older may contribute $6,500.
10) ALTERNATIVE MINIMUM TAX EXEMPTION -
11) NET CAPITAL GAINS & QUALIFIED DIVIDENDS RATE - The long term capital gains for 2016 are as follows:
12) AMERICAN OPPORTUNITY TAX CREDIT - Has been permanently extended. This credit is for Higher Education Tuition and related expenses paid. The credit is the sum of 100% of first $2,000 plus 25% of the next $2,000 of qualified expenses for a total maximum credit of $2,500 per eligible student. The credit amount phases out at certain income levels.
13) EDUCATOR DEDUCTIONS - A $250 above-the-line deduction for educator expenses to include unreimbursed expenses for books, supplies, computer equipment and supplementary materials used in the classroom. Any additional costs can be deducted as a miscellaneous deduction if you itemize.
14) CHARITABLE DONATIONS -Record keeping requirements have been made tougher for both cash and non-cash charitable donations. You must have either: 1) a bank record, including a cancelled check, a bank or credit union statement, or a credit card statement; or 2) a receipt, letter, or written communication from the donee, indicating the donee’s name and the contribution date and amount. Non-cash donations such as clothing and household items must be in "good" used condition or better.
15) KIDDIE TAX - In 2017, if your child is under the age of 19, first $2,100 of investment income is tax free.
If you would like more detailed information or have any questions, please feel free to call me.