The IRS has released the key tax numbers that are updated annually for inflation, including tax rates, phaseouts, standard deduction, exemption amount, and contribution limits. Since inflation was low in 2016, only small changes have been made in most cases. Some notable callouts for those who don’t want to read all the way through the update:
· Social Security payments will increase by 0.3% in 2017. The Social Security Wage Base (the max amount of income subject to the 6.2% Social Security Tax) increases dramatically from $118,500 to $127,200 (it’s calculated based on wage increases and by law could not increase in 2016 since there was no SS COLA increase).
· Max contributions to 401k, 403b, and 457 retirement accounts remain unchanged at $18,000 (+$6000 catch-up if you’re at least age 50).
· Max contribution to a SIMPLE retirement account remains unchanged at $12,500 (+$3000 catch-up if you’re at least age 50).
· Max total contribution to most employer retirement plans (employee + employer contributions) increases from $53,000 to $54,000.
· Max contribution to an IRA remains unchanged at $5,500 (+$1,000 catch-up if you’re at least age 50).
· The phase out for being able to make a Roth IRA contribution is $196k (married) and $133k (single). Phase out begins at $186k (married) and $118k (single).
· The standard deduction increases by $100 to $12,700 (married) and by $50 to $6,350 (single) +$1,250 if you’re at least age 65.
· The personal exemption remains unchanged at $4,050 per family member. Remember that exemption amounts begin to be phased out if your income exceeds $313,800 (married) or $261,500 (single). The exemption is reduced by 2% for every $2500 of AGI over threshold until reduced to $0.
· Itemized deductions are reduced by 3% of the amount AGI is over $313,800 (married) or $261,500 (single).
· The annual gift tax exemption remains at $14,000 per giver per receiver.
· The maximum contribution to a Health Savings Account (HSA) remains at $6,750 (married) but increases by $50 to $3,400 (single).
· Note that mileage rates have not been updated yet for 2017.