Every year, the Internal Revenue Service announces cost-of-living adjustments that affect contribution limits for retirement plans, thresholds for deductions and credits, and standard deduction and personal exemption amounts. Here are a few of the key adjustments for 2017.
Retirement plans
- Employees who participate in 401(k), 403(b), and most 457 plans can defer up to $18,000 in compensation in 2017 (the same as in 2016); employees age 50 and older can defer up to an additional $6,000 in 2017 (the same as in 2016).
- Employees participating in a SIMPLE retirement plan can defer up to $12,500 in 2017 (the same as in 2016), and employees age 50 and older will be able to defer up to an additional $3,000 in 2017 (the same as in 2016).
IRAs
The limit on annual contributions to an IRA remains unchanged at $5,500 in 2017, with individuals age 50 and older able to contribute an additional $1,000. For individuals who are covered by a workplace retirement plan, the deduction for contributions to a traditional IRA is phased out for the following modified adjusted gross income (AGI) ranges:
| 2016 | 2017 | |
|---|---|---|
| Single/head of household (HOH) | $61,000 – $71,000 | $62,000 – $72,000 |
| Married filing jointly (MFJ) | $98,000 – $118,000 | $99,000 – $119,000 |
| Married filing separately (MFS) | $0 – $10,000 | $0 – $10,000 |
Note: The 2017 phaseout range is $186,000 – $196,000 (up from $184,000 – $194,000 in 2016) when the individual making the IRA contribution is not covered by a workplace retirement plan but is filing jointly with a spouse who is covered.
The modified AGI phaseout ranges for individuals making contributions to a Roth IRA are:
| 2016 | 2017 | |
|---|---|---|
| Single/HOH | $117,000 – $132,000 | $118,000 – $133,000 |
| MFJ | $184,000 – $194,000 | $186,000 – $196,000 |
| MFS | $0 – $10,000 | $0 – $10,000 |
Estate and gift tax
- The annual gift tax exclusion remains at $14,000.
- The gift and estate tax basic exclusion amount for 2017 is $5,490,000, up from $5,450,000 in 2016.
Personal exemption
The personal exemption amount remains at $4,050. For 2017, personal exemptions begin to phase out once AGI exceeds $261,500 (single), $287,650 (HOH), $313,800 (MFJ), or $156,900 (MFS).
Note: These same AGI thresholds apply in determining if itemized deductions may be limited. The corresponding 2016 threshold amounts were $259,400 (single), $285,350 (HOH), $311,300 (MFJ), and $155,650 (MFS).
Standard deduction
These amounts have been adjusted as follows:
| 2016 | 2017 | |
|---|---|---|
| Single | $6,300 | $6,350 |
| HOH | $9,300 | $9,350 |
| MFJ | $12,600 | $12,700 |
| MFS | $6,300 | $6,350 |
Note: The 2016 and 2017 additional standard deduction amount (age 65 or older, or blind) is $1,550 for single/HOH or $1,250 for all other filing statuses. Special rules apply if you can be claimed as a dependent by another taxpayer.
Alternative minimum tax (AMT)
AMT amounts have been adjusted as follows:
| 2016 | 2017 | |
|---|---|---|
| Maximum AMT exemption amount | ||
| Single/HOH | $53,900 | $54,300 |
| MFJ | $83,800 | $84,500 |
| MFS | $41,900 | $42,250 |
| Exemption phaseout threshold | ||
| Single/HOH | $119,700 | $120,700 |
| MFJ | $159,700 | $160,900 |
| MFS | $79,850 | $80,450 |
| 26% on AMTI* up to this amount, 28% on AMTI above this amount | ||
| MFS | $93,150 | $93,900 |
| All others | $186,300 | $187,800 |
| *Alternative minimum taxable income | ||
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To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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