Need-to-Know Changes to The Federal Income Tax 2017 Code.

Strategies to reduce your tax liability in the year ahead.

Now that we are into Tax Year 2017, it’s a good idea to set aside some time to plan for the tax year ahead. Preparing for 2017’s changes now can help you avoid problematic issues down the road, and may even put some cash in your pocket come tax time. Here’s what you need to know:

  1. Increases to the standard deduction

2017 will bring a slight increase to the standard deduction. If you are an individual filer, head of household, or a couple filing jointly, you are eligible for a little extra green come tax time. Although the deduction is small, any change to the tax code that reduces your tax liability is always welcome news.

  1. Modest increases to the estate tax exemption

Starting in 2017, estates of individual decedents who pass away will be exempt up to $5.49 million – a $40,000 increase from 2016 levels. Estate taxes generally affect only a small portion of the public. But if President Trump gets his way, they may be eliminated entirely. Stay tuned.

  1. Tax bracket adjustments

Inflation usually has a direct impact on changes to the tax bracket. As the inflation rate has been minimal as of late, you’ll notice that changes to the 2017 tax bracket are negligible. Which means unless you expect a significant salary increase or a large bonus, there’s probably no need to make any adjustments.

The 2016 tax bracket: (the bracket you’ll be using for your taxes in a few months.)

Tax Rate Single Married, Filing Jointly Married, Filing Separately Head of Household 
10% $0 to $9,275 $0 to $18,550 $0 to $9,275 $0 to $13,250
15% $9,276 to $37,650 $18,551 to $75,300 $9,276 to $37,650 $13,251 to $50,400
25% $37,651 to $91,150 $75,301 to $151,900 $37,651 to $75,950 $50,401 to $130,150
28% $91,151 to $190,150 $151,901 to $231,450 $75,951 to $115,725 $130,151 to $210,800
33% $190,151 to $413,350 $231,451 to $413,350 $115,726 to $206,675 $210,801 to $413,350
35% $413,351 to $415,050 $413,351 to $466,950 $206,676 to $233,475 $413,351 to $441,000
39.6% $415,051+ $466,951+ $233,476+ $441,101+

The 2017 tax bracket:

Tax Rate Single Married, Filing Jointly Married, Filing Separately  Head of Household
10% $0 to $9,325 $0 to $18,650 $0 to 9,325 $0 to $13,350
15% $9,326 to $37,950 $18,651 to $75,900 $9,326 to $37,950 $13,351 to $50,800
25% $37,951 to $91,900 $75,901 to $153,100 $37,951 to $76,550 $50,801 to $131,200
28% $91,901 to $191,650 $153,101 to $233,350 $76,551 to $116,675 $131,201 to $212,500
33% $190,651 to $416,700 $233,351 to $416,700 $116,676 to $208,350 $212,501 to $416,700
35% $416,701 to $418,400 $416,701 to $470,700 $208,351 to $235,350 $416,701 to $444,550
39.6% $418,401+ $470,701+ $235,351+ $444,551+
  1. New medical expense deduction rules for seniors

In 2016, taxpayers 65 and older were able to deduct medical expenses that surpassed 7.5% of their adjusted gross income (AGI).  But in 2017, seniors will be taxed just like everyone else. If you’re 65 or older, your medical expenses will now need to top 10% of your AGI before you can claim itemized medical deductions.

  1. Higher Traditional and Roth IRA phase-outs

If you are invested in a Traditional IRA, you’re probably familiar with its tax-deferred advantages – you pay no tax on it until you begin making withdrawals during retirement. But Traditional IRAs may also provide an additional benefit – lowering your current year tax liability. In 2017, the phase-out range for taking this deduction increases $1,000 to $62,000 to $72,000 for single taxpayers, and $99,000 to $119,000 for married couples filing jointly.

For those invested in a Roth IRA, a retirement account with no upfront tax deduction that can grow tax-free for life – the individual phase-out to be able to contribute rose $1,000 for single filers to a range of $118,000 to $133,000. For married couples filing jointly, the phase-out jumped $2,000 to a range of $186,000 to $196,000.

The bottom line – due to these modest increases, more taxpayers will able to contribute to both types of IRAs in 2017.

U.S. Master Tax Guide 2017,Wolters Kluwer 100 Edit.; www.fool.com/retirement;

DID YOU KNOW?

Approximately 80% of all taxpayers receive a refund on their federal tax returns. Don’t chance leaving money on the table. Call the law offices of Daniel M. Silvershein today at 212.387.7880 or 888.382.7880.