Do you know anyone who gets genuinely excited around tax season? Excited as in genuinely ecstatic to tread through the ever-changing deductions and tax rate schedules that are updated annually? If so, they are almost certainly an accountant! While ‘excitement’ may not be the choice word that we at Accounting Solutions Ltd. regarding the upcoming tax season, we continue to pride ourselves on the work and dedication that we put in as a team in order to ensure that our clients receive the most concise and supportive services that Chicago has to offer.
As a follow up to one of our previous articles, we have chosen to compile a list that provides our followers with some more comprehensive information regarding what to expect for the 2017 season. As predicted, there have been a number of changes, with more than 50 different tax provisions being affected by adjustments to inflation, some of which will be elaborated below:
- For starters: The tax rate structure which was experienced in 2016 has not changed, still floating somewhere between ten and 39.5 percent. Tax-bracket thresholds have effectively increased for each filing status, however.
- Inflation has lead to a positive trend with standard deductions and personal exemptions, something which was explicated in this article.
- The Alternative Minimum Tax (AMT) was recently fixed by the American Taxpayer Relief Act, and a new clause allows use of nonrefundable personal credits as a counter-measure against it. This year’s exemption amounts are around $54,300 for individuals and $84,500 for couples filing together, an increase from 2016’s $53,900 and $83,800.
- Health Savings Accounts (HSAs) are typically used to pay for current or future medical expenses for anyone who is eligible for them. The main prerequisite for these expenses is that they cannot be reimbursed by insurance companies or any other entities. To qualify, an individual must be covered by a High Deductible Health Plan and no other health insurance (unless pertaining to dental/vision care, accidents, disability, or long term care). In 2017 a qualifying HDHP must have a deductible of $2,600 for families or $1,300 for self coverage and also have to limit annual self induced expenses of the beneficiaries.
- The current penalty utilized for not maintaining minimum essential health coverage is $695.
- From 2017 onwards, the amount that is needed to reduce the net unearned income on a child’s return that is privy to the ‘kiddie tax’ is $1,050, the same as last year. This amount is also applied to determine whether or not parents are eligible to elude a child’s income within the parent’s gross income. The net unearned income for a child under nineteen that isn’t subject to ‘kiddie tax’ is $2,100.
- The foreign earned income exclusion has also increased from 2016’s $101,300 to $102,100.
- Since 2013, Medicare taxes have increased, with an additional 0.9 percent applying to people with wages above $200,000. This will remain in full effect in 2017, as will the 3.8 percent Medicare tax on investment income for single taxpayers with adjusted gross incomes of more that $200,000.
- PEP (personal exemption phase-out) and Pease (limitations on itemized deductions) have been extended and adjusted for inflation for taxable years starting in 2013. In 2017 this affects taxpayers with incomes above $261,500 ($318,800 for married couples).
- The tax exclusion included for inherited estates now rests at $5,490,000, an increase from $5,450,000. The maximum tax rate has not changes, remaining at 40 percent.
- Annual exclusions pertaining to gifts still rests at $14,000.
With tax season around the corner, we hope that this quick guide will be of use to many clients. If you have any further questions, or wish to clarify the above information, feel free to give us a call.
**Disclaimer: These are the updates for 2017 currently. There are many tax laws and changes that will occur during this year that may change the information contained herein. Please consult with the tax practitioner of your choice prior to implementing any of these changes based upon this information.**