By Mario McKellop
According to the Internal Revenue Service, one in seven Americans waits until the week of April 15 to file their income tax returns. While the process can be anxiety-inducing, there’s no good reason to add gasoline to the fire by waiting until the last minute to take care of something so important. One way to make the whole thing less stressful is to learn how recent changes to the tax code will affect returns for the 2017 tax year. Specifically, changes to the code relating to tax deductions.
The Standard Deduction
Just as inflation increases annually, so does the inflation-indexed standard deduction. The standard deduction for single and married taxpayers filing separate returns is $6,350, an increase of $50 from 2016. For married couples and surviving spouses, the standard deduction is $12,700, a $100 increase from last year. And for those filing returns as heads of household, the standard reduction is $9,350, $50 more than the previous year.
While the standard deduction only experienced a small change from 2016 to 2017, the year-to-year changes related to the limits of itemized deductions for affluent taxpayers are more significant. For single taxpayers, the 2017 limitation threshold begins with an adjusted gross income (AGI) of $261,500, up from $259,400 in 2016. For married and surviving spouse taxpayers, the threshold has gone from $311,300 to $313,800. For married taxpayers filing as individuals, the threshold has changed from $155,650 to $156,900. For those filing as heads of household, the threshold has risen from $285,350 to $287,650. As with last year, the itemized deduction limitation is applied to either 3 percent of a taxpayer’s AGI, or 80 percent of a taxpayer’s total itemized deductions, whichever is least.
Other Deduction Changes
Here are a few other miscellaneous deductions that may lower your burden for the tax year 2017.
For 2016 returns, individual taxpayers over the age of 65 who filed itemized returns could have deducted certain medical and dental expenses, provided that those expenses totaled 7.5 percent of their AGI. For 2017 returns, the deduction threshold has risen to 10 percent of the AGI.
Taxpayers who maintain self-covered medical savings accounts (MSA) can take advantage of a higher tax-deductible next year. The maximum amount that can be deducted for out-of-pocket expenses has risen to $4,500, up $50 from 2016. For families with self-covered MSAs, the out-of-pocket maximum deductible has risen to $8,250, up $100 from 2016.
By Mario McKellop