IRS Updates

STANDARD DEDUCTIONS / 2017
Single or Married Filing Separate
Married Filing Jointly
Head of Household

$6,350.00
$12,700.00
$9,350.00

MARGINAL TAX BRACKET ON
2017 INCOME TAX

(For the following tax status) Single, Head of Household (HOH), Married Filing Jointly (MFJ), and Married Filing Separately (MFS).

Single

10% =
15% =
25% =
28% =
33% =
35% =
39.6% =

$0-$9325
$9,325-$37,950
$37,950-$91,900
$91,900-$191,650
$191,650-$416,700
$416,700-$418,400
$418,400+

HOH

10% =
15% =
25% =
28% =
33% =
35% =
39.6% =

$0-$13,350
$13,350-$50,800
$50,800-$131,200
$131,200-$212,500
$212,500-$416,700
$416,700-$444,500
$444,500+

MFJ

10% =
15% =
25% =
28% =
33% =
35% =
39.6% =

$0-$18,650
$18,650-$75,900
$75,900-$153,100
$153,100-$233,350
$233,350-$416,700
$416,700-$470,700 $470,700+

MFS

10% =
15% =
25% =
28% =
33% =
35% =
39.6% =

$0-$9325
$9,325-$37,950
$37,950-$91,900
$91,900-$191,650
$191,650-$416,700
$416,700-$418,400
$418,400+

Your “Effective” tax rate may actually be lower. Effective tax rate is the amount of taxes you actually do pay after deductions, credits and exemptions; and is the result of a competently completed tax return. (IE) AGI – deductions – credits – exemptions = Taxable Income. Tax Liability/Taxable Income x 100 = Effective tax rate. Tax liability is calculated using IRS tax table for taxable income based on Marginal Tax Brackets shown above. Keep in mind that everyone’s tax situation is different, so exemption amounts and deductions will vary as some taxpayers will not qualify for various tax credits due to limitations or regulations.

More Information

Child Tax Credit

Child tax credit is $1,000.00 for a dependent child under the age of 17, and did not turn 17 within that tax year. However, the exact amount of tax credit actually received on the tax return may be affected by the annual income.

PERSONAL EXEMPTION AMOUNTS

2017-$4050.00/person (For income tax filers not affected by income limitation phase outs)

CHARITABLE CONTRIBUTIONS

Donate as much as possible to IRS recognized charitable organizations. (Cash or Non-Cash). Please obtain a receipt from the organization or charitable foundation. Take pictures of larger items in order to obtain a larger tax deduction for those items. Charitable contributions help to increase deductions and reduce taxable income.

MEDICAL DEDUCTIONS

Out-of-pocket medical expenses must exceed 10% of Adjusted Gross Income Medical expenses do not include pre-tax payroll deductions for company health insurance benefits.

GIFT EXCLUSIONS

A maximum of $15,000/person; however this is not tax deductible to gifter, nor is it taxable income to the recipient.

401K CONTRIBUTIONS

Maximum contributions of $18,500 under the age of 50. Over the age of 50, an additional $500 annually, or $24,500 may be contributed (catch up contributions). Thisis another mean for high income earners to reduce taxable income. Make every effort to maximize your contribution limit.

ROTH CONTRIBUTION PHASE-OUT

The Adjusted Gross Income (AGI) phase out range for taxpayer’s married filing joint in 2018 is $189,000-$199,000. Phase out range for single and head of household filer for 2018 is $120,000-$135,00. *Increase of $2,000 from 2017! This is especially important in financial planning for the long term future. These funds will grow tax free. We cannot stress enough how much of a tax advantage this can be for those eligible to make Roth contributions.

CAPITAL GAINS

Short-Term capital gains are taxed as ordinary income. Long term gains are taxed at 15% if income is in 25%, 28%, 33%, or 35% marginal tax bracket. Long-term capital gains are taxed at 20% if income is in 39.6% marginal tax bracket. Zero taxes on long-term gains if in 10% or 15% marginal tax bracket.

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