8 Changes Coming to Your Taxes in 2017
Money + Markets

8 Changes Coming to Your Taxes in 2017

Reuters

Thanks to inflation, the Internal Revenue Agency is adjusting more than 50 tax provisions, including increasing the standard deduction that more than two-thirds of Americans take annually.

The changes apply to the tax year 2017, which is filed in 2018, and don’t affect your 2016 tax returns.

Here are the changes to some of the more common tax provisions:

Standard deduction: The standard deduction for married couples filing jointly increases $100 in tax year 2017, to $12,700. The deduction for single taxpayers and married individuals filing separately rises $50, to $6,350. The deduction for heads of households also increases $50, to $9,350.

Related: 21 States With the Worst Tax Rates

Personal exemption: The phase-out for the personal exemption begins with adjusted gross income (AGI) of $261,500 (versus $259,400 in 2016) and phases out completely at $384,000 (versus $381,900). The personal exemption amount remains unchanged at $4,050.

Tax rate: The 39.6 percent tax rate affects single taxpayers whose income exceeds $418,400 — up from $415,050 in 2016 — and married taxpayers filing jointly with income above $470,700, versus $466,950 before.

Itemized deductions: Single taxpayers with incomes of $287,650 and above and married couples filing jointly making $313,800 or more are subject to limits on itemized deductions. That’s up from $259,400 or $311,300, respectively. Just under a third of Americans itemize their returns.

Earned income tax credit: The maximum value of this credit increases to $6,318 for taxpayers filing jointly who have three or more qualifying children, up from $6,269 for tax year 2016.

Lifetime learning credit: In tax year 2017, this credit is reduced for joint filers with adjusted gross incomes of $112,000 or more, up from $111,000 in 2016.

Related: 8 Red Flags That Could Trigger an IRS Tax Audit

Health care coverage: For self-employed workers who have tax-deferred Medical Savings Accounts, there are several changes. Health plans that cover these workers must limit non-reimbursable medical expenses to $4,500. That's up $50 from 2016. The minimum annual deductible for family coverage for these workers is also now $4,500. And the maximum deductible can’t exceed $6,750, up $50 from 2016. For family coverage, the limit on out-of-pocket medical expenses is $8,250 for tax year 2017, an increase of $100 from 2016.

Alternative minimum tax: The exemption amount for tax year 2017 is $54,300 for individuals and $84,500 for married couples filing jointly, compared with the 2016 exemption amount of $53,900 and $83,800, respectively. 

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