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Income Taxes for 2017 and Beyond
What we know…
- There will be typical adjustments for inflation for the following items:
- Standard Deductions will increase. There is a $50 increase from 2016 for both individual and head of household filers to equal $6,350 and $9,350 respectively. For married filing joint filers, the standard deduction for 2017 increased by $100 and will be $12,700.
- Tax Brackets will be adjusted slightly.
- Phase-out limits for deductible IRA contributions will increase by $1,000 for single taxpayers and $2,000 for married couples filing jointly.
- The estate tax exemption will increase by $40,000. This raises the amount to $5.49 million for 2017.
- Deductible medical expenses will decrease for taxpayers who are 65 and older. Previously they were allowed to deduct medical expenses in excess of 7.5% of their Adjusted Gross Income (AGI). Beginning in 2017, this threshold will increase to 10%, which is equal to the threshold for other taxpayers.
What is possible…
Potential tax changes under President Trump’s proposed plan:
- Decrease the number of individual income tax brackets from seven to three.
- Itemized deductions would only be allowed for mortgage interest, charitable contributions and retirement savings.
- Standard Deductions would be doubled for everyone.
- Elimination of the following for individual income taxes:
- Personal exemptions
- Head of household filing status
- Alternative Minimum Tax (AMT)
- Net Investment Income Tax. (3.8%)
- Tax penalties for not carrying health insurance.
- Creation of Dependent Care Savings Accounts (DCSA). These would grow tax-free with maximum annual contributions of $2,000.
- Addition of up to $5,000 deduction for elder care expenses (if elder is a dependent on tax return)
- Elimination of the estate tax.
- Decrease the maximum small business and corporate tax rate from 35% to 15%. This decreased rate would also be extended to S Corporations and partnerships.
However, please keep in mind the President’s proposed tax changes still have many obstacles to overcome before they would be approved and become law. Consequently, one should be careful in doing substantial tax planning based on the above proposed changes.
For more information, please contact Bosshard Parke Ltd. to schedule a consultation with one of our attorneys or tax professionals.