Various tax changes inevitably occur from year to year. These can range from minor adjustments to the complete elimination of various tax provisions. The Internal Revenue Service has released information on a number of tax changes for the 2017 tax year.
While much is written about the length and complexity of the U.S. Tax Code, the fact is that much of it doesn't apply to the average taxpayer. In reality, taxes can be relatively straightforward for many individuals.
However, you should be on the lookout for the various tax changes that inevitably occur from year to year. These can range from minor adjustments to the complete elimination of various tax provisions. The Internal Revenue Service has released information on a number of tax changes for the 2017 tax year. (Don’t worry. When you use TurboTax, you’ll always be up-to-date with the latest tax laws.)
Inflation increases the cost of goods and services for consumers. To ensure that American taxpayers keep pace with the rising costs of inflation, the IRS periodically adjusts the value of certain deductions and exemptions. With rising deductions and exemptions, you get to protect more of your money from becoming taxable income.
For tax year 2017, the IRS increased the value of some different tax benefits, while leaving some the same as last year:
- Personal and dependent exemptions remain $4,050
- The standard deduction rises to $6,350 for single, $9,350 for head of household, and $12,700 for married filing jointly
- The maximum earned income tax credit rises to $6,318
- The maximum income limit for the EITC rises to $53,930
- The foreign earned income deduction rises to $102,100
- Annual deductible amounts for Health Savings Accounts increases for individuals to $3,400 but with no change for families
- The estate and gift tax exclusion rises to $5.49million
According to Jeff Gonzalez, a CPA and the CFO of Los Angeles-based Electric Entertainment, "Inflation adjustments can be a big thing. They don't come every year, but when they do, they translate into additional money in your pocket."
New foreign financial disclosures
One of the latest tax buzzwords is "offshore accounts," as the IRS has begun taking a closer look at the foreign holdings of American citizens. During the transitional tax year of 2011, only certain taxpayers had to make foreign disclosures to the IRS. As of 2012 and beyond, all taxpayers who meet the minimum threshold, which varies by tax-filing and residence status, must comply.
"If your overseas assets don't exceed $50,000, you don't have to worry about the new rules," says Gonzalez. "Above that amount, check the IRS reporting limits, which may change from year to year in the future."
For U.S. residents, you have to file information about your foreign holdings if they exceed $50,000 at year-end, if you're a single filer. Foreign holdings exceeding $75,000 at any time during the year must also be reported. For joint filers, the limits rise to $150,000 at any time, and $75,000 at year-end.
For U.S. citizens living abroad, the reporting limits rise dramatically. Single filers need only report accounts exceeding $200,000 at year-end, or $300,000 at any point during the year. For joint filers, the limits are $400,000 at year-end, or $600,000 at any time during the year.
The above requirements for filing Form 8938 do not take the place of the obligation to file an FBAR (Foreign Bank Account Report, Treasury Form TD F 90-22.1) to report a financial interest in or signature authority over a foreign financial account.
2017 continues with the following tax increases started in 2013:
- An additional tax bracket has been added for individuals with taxable income greater than $400,000 and joint filers with taxable income over $450,000
- Tax on long-term capital gains is increased from 15 to 20 percent for individuals with taxable income greater than $400,000 and joint filers with taxable income over $450,000
- 3.8 percent Medicare surtax on the lesser of net investment income or modified adjusted gross income above $200,000 for individuals and $250,000 for joint filers.
- Additional Medicare payroll tax of 0.9 percent on earned income above $200,000 for individuals and $250,000 for joint filers.
Other changes that will affect taxes
The threshold for unreimbursed medical expenses increased from 7.5 percent to 10 percent of Adjusted Gross Income (AGI) for most taxpayers in 2014. There was a temporary exemption from Jan. 1, 2013 to Dec. 31, 2016 for individuals age 65 and older and their spouses. For 2017 and 2018, all taxpayers are subject to a decreased threshold of 7.5 percent.
Beginning Jan. 1, 2019, the threshold increases to 10 percent of AGI.
While not labeled as tax increases by the IRS, the following will increase the amount of taxes due on single filers with (AGI) greater than $250,000 and joint filers with AGI greater than $300,000:
- Personal exemption phaseout - for every $2,500 of AGI above these income limits, the $4,050 (2017) per-person personal exemption will be reduced by 2%. Personal exemption will be fully phased out for individuals with AGI greater than $384,000 and joint filers with AGI greater than $436,300.
- Itemized deduction phaseout - reduces itemized deductions by 3% of the AGI above the limits (for 2017, that threshold is $313,800 for married couples filing jointly and $287,650 for single filers) to a maximum reduction of 80%.
Remember, with TurboTax, we'll ask you simple questions about your life and help you fill out all the right tax forms. Whether you have a simple or complex tax situation, we've got you covered. Feel confident doing your own taxes.