Tax Update: 2017 Cost-of-Living Adjustments

Posted by lgtcpa on Feb 22, 2017

The IRS recently issued its 2017 cost-of-living adjustments. Because inflation remains relatively in check, many amounts increase only slightly, and some stay at 2016 levels.

Individual income taxes

Tax-bracket thresholds increase for each filing status but, because they’re based on percentages, they increase more significantly for the higher brackets. For example, the top of the 10% bracket increases by $50 to $100, depending on filing status, but the top of the 35% bracket increases by $1,875 to $3,750, again depending on filing status.

2017 ordinary-income tax brackets

Tax rate

Single

Head of household

Married filing jointly or surviving spouse

Married filing separately

10%

$0 - $9,325

$0 - $13,350

$0 - $18,650

$0 - $9,325

15%

$9,326 - $37,950

$13,351 - $50,800

$18,651 - $75,900

$9,326 - $37,950

25%

$37,951 - $91,900

$50,801 - $131,200

$75,901 - $153,100

$37,951 - $76,550

28%

$91,901 - $191,650

$131,201 - $212,500

$153,101 - $233,350

$76,551 - $116,675

33%

$191,651 - $416,700

$212,501 - $416,700

$233,351 - $416,700

$116,676 - $208,350

35%

$416,701 - $418,400

$416,701 - $444,550

$416,701 - $470,700

$208,351 - $235,350

39.6%

Over $418,400

Over $444,550

Over $470,700

Over $235,350

The personal and dependency exemption remains unchanged at $4,050 for 2017. The exemption is subject to a phaseout, which reduces exemptions by 2% for each $2,500 (or portion thereof) by which a taxpayer’s adjusted gross income (AGI) exceeds the applicable threshold (2% of each $1,250 for separate filers).

For 2017, the phaseout starting points increase by $1,250 to $2,500, to AGI of $261,500 (singles), $287,650 (heads of households), $313,800 (joint filers), and $156,900 (separate filers). The exemption phases out completely at $384,000 (singles), $410,150 (heads of households), $436,300 (joint filers), and $218,150 (separate filers).
Your AGI also may affect some of your itemized deductions. An AGI-based limit reduces certain otherwise allowable deductions by 3% of the amount by which a taxpayer’s AGI exceeds the applicable threshold (not to exceed 80% of otherwise allowable deductions). The thresholds are the same as for the personal and dependency exemption phaseout.


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Topics: Accounting Tips, Tax