2017 IRS Tax Brackets

Estimated Income Tax Brackets and Rates

In 2017, the income limits for all tax brackets and all filers will be adjusted for inflation and will be as follows (Table 1). The top marginal income tax rate of 39.6 percent will hit taxpayers with taxable income of $418,400 and higher for single filers and $470,700 and higher for married couples filing jointly.

Table 1. Single Taxable Income Tax Brackets and Rates, 2017
Rate Taxable Income Bracket Tax Owed

10%

$0 to $9,325 10% of Taxable Income

15%

$9,325 to $37,950 $932.50 plus 15% of the excess over $9325

25%

$37,950 to $91,900 $5,226.25 plus 25% of the excess over $37,950

28%

$91,900 to $191,650 $18,713.75 plus 28% of the excess over $91,900

33%

$191,650 to $416,700 $46,643.75 plus 33% of the excess over $191,650

35%

$416,700 to $418,400 $120,910.25 plus 35% of the excess over $416,700

39.60%

$418,400+ $121,505.25 plus 39.6% of the excess over $418,400
Table 2. Married Filing Joint Taxable Income Tax Brackets and Rates, 2017
Rate Taxable Income Bracket Tax Owed

10%

$0 to $18,650 10% of taxable income

15%

$18,650 to $75,900 $1,865 plus 15% of the excess over $18,650

25%

$75,900 to $153,100 $10,452.50 plus 25% of the excess over $75,900

28%

$153,100 to $233,350 $29,752.50 plus 28% of the excess over $153,100

33%

$233,350 to $416,700 $52,222.50 plus 33% of the excess over $233,350

35%

$416,700 to $470,700 $112,728 plus 35% of the excess over $416,700

39.60%

$470,700+ $131,628 plus 39.6% of the excess over $470,700
Table 3. Head of Household Taxable Income Tax Brackets and Rates, 2017
Rate Taxable Income Bracket Tax Owed

10%

$0 to $13,350 10% of taxable income

15%

$13,350 to $50,800 $1,335 plus 15% of the excess over $13,350

25%

$50,800 to $131,200 $6,952.50 plus 25% of the excess over $50,800

28%

$131,200 to $212,500 $27,052.50 plus 28% of the excess over $131,200

33%

$212,500 to $416,700 $49,816.50 plus 33% of the excess over $212,500

35%

$416,700 to $444,500 $117,202.50 plus 35% of the excess over $416,701

39.60%

$444,550+ $126,950 plus 39.6% of the excess over $444,550
Source: IRS.

Standard Deduction and Personal Exemption

The standard deduction for single filers will increase by $50 and $100 for married couples filing jointly (Table 4).

The personal exemption for 2017 remains the same at $4,050.

Table 4. 2017 Standard Deduction and Personal Exemption
Filing Status Deduction Amount
Single $6,350
Married Filing Jointly $12,700
Head of Household $9,350
Personal Exemption $4,050
Source: IRS.

PEP and Pease

PEP and Pease are two provisions in the tax code that increase taxable income for high-income earners. PEP is the phaseout of the personal exemption and Pease (named after former Senator Donald Pease) phases out the value of most itemized deductions once a taxpayer’s adjusted gross income reaches a certain amount.

The income threshold for both PEP and Pease will increase from last year to $261,500 for single filers and $318,800 for married couples filing jointly (Tables 5 and 6). PEP will end at $384,000 for singles and $436,300 for married couples filing jointly (both will increase from 2016), meaning that taxpayers with AGI above these limits will no longer benefit from personal exemptions.

Table 5. 2017 Pease Limitations on Itemized Deductions
Filing Status Income
Single $261,500
Married Filing Jointly $313,800
Head of Household $287,650
Married Filing Separately $156,900
Source: IRS.
Table 6. 2017 Personal Exemption Phaseout
Filing Status Phaseout Begins Phaseout Complete
Single $261,500 $384,000
Married Filing Jointly $313,800 $436,300
Head of Household $287,650 $410,150
Married Filing Separately $156,900 $218,150
Source: IRS.

Alternative Minimum Tax

The Alternative Minimum Tax (AMT) was created in the 1960s to prevent high-income taxpayers from avoiding the individual income tax. This parallel tax income system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two.

The AMT uses an alternative definition of taxable income called Alternative Minimum Taxable Income (AMTI). To prevent low- and middle-income taxpayers from being subject to the AMT, taxpayers are allowed to exempt a significant amount of their income from AMTI. However, this exemption phases out for high-income taxpayers. The AMT is levied at two rates: 26 percent and 28 percent.

The AMT exemption amount for 2017 is $54,300 for singles and $84,500 for married couples filing jointly (Table 7).

Table 7. 2017 Alternative Minimum Tax Exemptions
Filing Status Exemption Amount
Single $54,300
Married Filing Jointly $84,500
Married Filing Separately $42,250
Trusts & Estates $24,100
Source: IRS.

In 2017, the 28 percent AMT rate applies to excess AMTI of $187,800 for all taxpayers ($93,900 for married couples filing joint returns).

Under current law, AMT exemptions phase out at 25 cents per dollar earned once taxpayer AMTI hits a certain threshold. In 2017, the exemption will start phasing out at $120,700 in AMTI for single filers and $160,900 for married taxpayers filing jointly (Table 8.

Table 8. 2017 Alternative Minimum Tax Exemption Phaseout Thresholds
Filing Status Threshold
Single $120,700
Married Filing Jointly $160,900
Married Filing Separately, Estates and Trusts $80,450

Earned Income Tax Credit

2017’s maximum Earned Income Tax Credit for singles, heads of households, and joint filers is $510, if the filer has no children (Table 9). The credit is $3,400 for one child, $5,616 for two children, and $6,318 for three or more children. All of the aforementioned are relatively small increases from 2016.

Table 9. 2017 Earned Income Tax Credit Parameters
Filing Status No Children One Child Two Children Three or More Children
Single or Head of Household Income at Max Credit

$6,670

$10,000

$14,040

$14,040

Maximum Credit

$510

$3,400

$5,616

$6,318

Phaseout Begins

$8,340

$18,340

$18,340

$18,340

Phaseout Ends (Credit Equals Zero)

$15,010

$39,617

$45,007

$48,340

Married Filing Jointly Income at Max Credit

$6,670

$10,000

$14,040

$14,040

Maximum Credit

$510

$3,400

$5,616

$6,318

Phaseout Begins

$13,930

$23,930

$23,930

$23,930

Phaseout Ends (Credit Equals Zero)

$20,600

$45,207

$50,597

$53,930

Source: IRS.

2017 Penalties for Affordable Health Care

If an individual goes without qualifying minimum essential coverage for more than a single period of up to three months in a year, he or she may owe a penalty under the Shared Responsibility payment. These have been in place since 2014 and the penalty increases annually. In 2016 and 2017, it is the higher of these amounts:

  • 2.5% of annual household income above the tax filing threshold to a cap of the national average bronze plan premium  OR
  • $695/adult and $347.50/child under 18 to a maximum penalty of $2,085 per family

Certain exemptions do apply in the case of hardships, certain life events, and other situations. In addition, those who have no affordable coverage because the cost of annual premiums exceeds 8 percent of their household income are also exempt. One needs to apply for exemption.

2017 IRS Tax Brackets

Key Changes to the Tax Rate:

  • Standard Deduction – Increased slightly to the following
    •  Single 6,350
    • Joint and Surviving Spouse 12,700
    • Married Separate 6,350
    • Head of Household 9,350
  • Gift Tax – Remains the same at $14,000

For the tax year 2017, the 28 percent AMT tax rate applies to taxpayers with taxable incomes above $187,800 ($93,900 for married individuals filing separately).

  • Personal Exemptions – the exemption is subject to a phase-out that begins with adjusted gross income of $261,500
    1. Married Jointly – starts to phase out $313,800
  • Foreign Earned Income Exclusion – Increased by $800 to $102,100
  • Earned Income Credit – The EIC for taxpayers filing Jointly who have 3 or more qualifying children is $6,318
  • Flexible Spending Arrangement – Contribution limits will remain at $2,600

Healthcare Coverage – Limits are increasing for tax-deferred Medical Savings Account (MSAs) for the self-employed. the maximum deductible amount for out-of-pocket expenses for self-only coverage ($4,500), the deductible limit on a plan with family coverage ($6,750) and the minimum deductible amount for annual family coverage ($4,500) have all increased by $50. The limit on out-of-pocket medical expenses under family coverage ($8,250) increased be $100.

Affordable Care Act – The President has vowed to repeal and he may have sufficient support in Congress to do so, but for now, the ACA remains the law. People who avoided signing up for health insurance in anticipation of changes are still subject to the lack-of-coverage penalty. The penalty for the 2016 tax year increased to either 2.5% of household AGI or a maximum of $2,085 ($695 per adult, $347.50 per child). For the 2017 tax year, the percentage stays the same, but the per person fee will be inflation adjusted.

Deductions for Senior Medical Expenses – One potential tax advantage in medical expenses for seniors is going away in 2017. In order to claim a deduction for medical expenses when itemizing, your qualified medical expenses must be greater than 10% of your adjusted gross income (AGI). An exception to this rule allowed seniors to deduct medical expenses over 7.5% of income, but that exception ended after the 2016 tax year.

Table 1. Single Taxable Income Tax Brackets and Rates, 2017
Rate Taxable Income Bracket Tax Owed

10%

$0 to $9,325 10% of Taxable Income

15%

$9,325 to $37,950 $932.50 plus 15% of the excess over $9325

25%

$37,950 to $91,900 $5,226.25 plus 25% of the excess over $37,950

28%

$91,900 to $191,650 $18,713.75 plus 28% of the excess over $91,900

33%

$191,650 to $416,700 $46,643.75 plus 33% of the excess over $191,650

35%

$416,700 to $418,400 $120,910.25 plus 35% of the excess over $416,700

39.60%

$418,400+ $121,505.25 plus 39.6% of the excess over $418,400
Table 2. Married Filing Joint Taxable Income Tax Brackets and Rates, 2017
Rate Taxable Income Bracket Tax Owed

10%

$0 to $18,650 10% of taxable income

15%

$18,650 to $75,900 $1,865 plus 15% of the excess over $18,650

25%

$75,900 to $153,100 $10,452.50 plus 25% of the excess over $75,900

28%

$153,100 to $233,350 $29,752.50 plus 28% of the excess over $153,100

33%

$233,350 to $416,700 $52,222.50 plus 33% of the excess over $233,350

35%

$416,700 to $470,700 $112,728 plus 35% of the excess over $416,700

39.60%

$470,700+ $131,628 plus 39.6% of the excess over $470,700
Table 3. Head of Household Taxable Income Tax Brackets and Rates, 2017
Rate Taxable Income Bracket Tax Owed

10%

$0 to $13,350 10% of taxable income

15%

$13,350 to $50,800 $1,335 plus 15% of the excess over $13,350

25%

$50,800 to $131,200 $6,952.50 plus 25% of the excess over $50,800

28%

$131,200 to $212,500 $27,052.50 plus 28% of the excess over $131,200

33%

$212,500 to $416,700 $49,816.50 plus 33% of the excess over $212,500

35%

$416,700 to $444,500 $117,202.50 plus 35% of the excess over $416,701

39.60%

$444,550+ $126,950 plus 39.6% of the excess over $444,550
Source: IRS.

Penalty for the Uninsured

Under the Affordable Care Act, also known as Obamacare, individuals who choose not to get health insurance through government exchanges, on their own or via their employers have to pay an additional tax.

If you do not have health insurance coverage in 2017, you’ll have to pay the higher of these two amounts:

  • 2.5 percent of your yearly income above the tax-filing threshold (generally about $10,350) up to a maximum cost of the national average premium to purchase a Bronze Plan from the federal healthcare exchange. Or …
  • $695 per person ($347.50 per child under 18). The maximum penalty per family using this method is $2,085.

Those costs have more than tripled from calendar year 2014 when the penalty was $95 per person or 1 percent of household income.

2017 Tax Filing Date

The filing deadline to submit 2016 tax returns was Tuesday, April 18, 2017, rather than the traditional April 15 date. In 2017, April 15 falls on a Saturday, and this would usually move the filing deadline to the following Monday — April 17. However, Emancipation Day — a legal holiday in the District of Columbia — will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 18, 2017. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.

Extensions are due October 16, 2017

6 Tax Saving Tips for 2017

  1. Invest to take advantage of lower long-term capital gain tax rates.

A top rate of 20% applies to qualified dividends and the sale of most appreciated assets held over one year, whereas Short-term capital gains do not benefit from any special tax rate. They are taxed at your ordinary income tax rate which may be as high at 39.6%.

Taxpayers in the 10 and 15 percent tax brackets pay no tax on long-term gains on most assets; taxpayers in the 25, 28, 33, or 35% income tax brackets face a 15 percent rate on long-term capital gains. For those in the top 39.6% bracket for ordinary income, the rate is 20%

Continue reading 6 Tax Saving Tips for 2017

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