Most people haven’t even begun thinking about filing their 2016 tax returns yet. However, the Internal Revenue Service has already announced changes to the U.S. tax code for 2017. These won’t impact the tax returns you file this April. However, it’s a good idea to be aware of them as you go into the new year. This can help you make financial decisions that will minimize your tax burden and also help you prevent running afoul of the tax laws.
The phase-out limits for traditional and Roth individual retirement accounts will increase in 2017. The phase-out income range for traditional IRAs will increase by $1,000. Therefore, people with slightly higher incomes (based on your modified adjustable gross income) will be able to take advantage of the tax-exempt savings provided by IRAs.
An important change that involves seniors who are at least 65 won’t have such a positive impact. People 65 and over are currently able to deduct medical expenses that exceed 7.5 percent of their adjusted gross income (as opposed to 10 percent for everyone else.) Beginning in 2017, however, the threshold will rise to 10 percent for everyone
The estate tax exemption will rise in 2017, although not by much. This won’t impact the vast majority of Americans. Currently, estates of $5.49 million are exempt from taxes. That amount will increase $40,000 in 2017.
Of course, as is the norm, both standard deductions and tax brackets will change. Tax brackets are adjusted for inflation, which has been minimal this year, so there won’t be a significant change there. The standard deductions for all filers will increase slightly.
If you have your taxes done by a professional tax preparer or even if you use tax preparation software, you shouldn’t have to worry about these changes being factored into your tax filing. However, it’s running afoul of tax laws for whatever reason can be costly and potentially get you into legal trouble. If that happens, an experienced New York attorney can provide advice and assistance.
Source: The Motley Fool, “5 Tax Changes for 2017 You’ll Want to Know About,” Sean Williams, Nov. 27, 2016