2017 Tax Laws Will Affect 2018 Filings
Now is the time to get acquainted with some of the changes that will affect 2017 taxes, filed in early 2018. The changes will affect income calculations, deductions and exemptions, ultimately impacting how much many individuals and families will see after filing this year’s taxes.
Tax brackets are adjusted for inflation
This should not be a surprise since income bracket is one of several dozen tax provisions that is adjusted annually for inflation. This year there is not going to be a large shift; with inflation below the long-term average rate, the income bracket change should not affect most people. Single filers in the lowest bracket will see an income increase of $50. At the top bracket, those listed as head of household will see a $3,550 bracket increase.
Standard deductions are going up
Taxpayers will see a slight increase in standard deductions when they file early next year. For individuals and those filing as head of household, an increase of $50 will put the standard 2017 deductions at, respectively, $6,350 and $9,350. For couples who file jointly, the new $12,700 deduction is $100 over the 2016 amount.
Medical expense exception for seniors is going away
Seniors may feel the hit as a senior medical expense rule changes. In general, taxpayers who itemize may claim a deduction for medical expenses over 10% of their adjusted gross income (AG). However, an exception that applied to seniors permitted the deduction of medical expenses that totaled more than 7.5% of their AGI. The exception ended this year, so seniors filing in early 2018 will be bumped back up to the 10% threshold that applies to the rest of taxpayers.
Roth IRA and Traditional IRA phase-outs rise
A small jump in the IRA phase-out means a few more people will be able to take advantage of the tax benefits of investing with an IRA. For those investing in a traditional IRA, an increase of $1,000 brings the phase-out range from $62,000 to $72,000 for single taxpayers and to $99,000 to $119,000 for married couples filing jointly. The Roth IRA $1,000 increase for individual filers means that the phase-out will be $118,000 to $133,000. For married couples filing jointly, the increase is $2,000, bringing the range to $186,000 to $196,000.