2017 Tax Year Cost of Living Adjustments

Well, we are about to wrap up 2016 and that brings to mind cost of living adjustments (or non-adjustments in some cases) to various tax provisions. Below is a list of the main tax provisions that would be of interest to most clients.  While these are of interest now, remember that a new administration is about to take office which could turn some of these provisions upside down.  That in itself is a constant reminder of how we must pay attention to any potential legislation as it comes to pass, as it will surely affect most of us.

1. The estate and gift tax exemption will increase from $5.45 million per person to $5.49 million in 2017. Right off the bat, the elimination of the estate tax was a campaign promise by the Trump campaign, so we will keep a close eye on this one.
2. Along with this lifetime exemption for estate tax listed above, the annual exclusion for gifting……remains the same: $14,000 per year per person without biting into the lifetime gifting exemption.
3. For IRA’s and Roth IRA’s the contribution limit will remain the same at $5,500, with the same $1,000 catch up amount for those 50 and older
4. While the Roth contribution limits are the same, the amount of income that cuts off those contributions will increase. The phase-out range for a single taxpayer will be $118,000 to $133,000 (up from $117,000 to $132,000) of modified adjusted gross income; and for married filing jointly the phase out will be $186,000 to $196,000, up $2,000 on either end from 2016.
5. The limit on what you can receive from a defined benefit plan will be $215,000, up from $210,000
6. 401(k), 403(b) and 457 plan employee contribution limits: these will remain the same at $18,000 per year, with the same catch up of $6,000 for those 50 and older.
7. SEP IRAs and solo 401(k)’s: the contribution limit will increase from $53,000 to $54,000.
8. On the income tax side, the standard deduction (if not itemizing) will increase to $12,700 for married and $6,350 for single. The personal exemption will remain the same at $4,050 per person.  Also, all of the tax brackets will increase a small amount, but the most painful bracket – the one that puts you into the 39.6% category – will increase to $418,400 of income for single taxpayers and $470,700 of income for married.

As always, consult with your tax advisor to see how these changes (or non-changes) may affect you for the 2017 tax year.

---