Inauguration Day is over and we know big changes are instore. But before we speculate on what’s coming, let’s focus on the here and now. Now here’s what we know for certain:
- In 2017, the standard mileage rate for business driving will be reduced to 53 ½ cents a mile. The rate for medical reasons drops to 17 cents a mile while charitable driving reimbursement rates are stalled at 14 cents a mile.
- $510,000 of qualifying Section 179 property can be expensed in 2017. This figure phases out dollar for dollar once over $2,030,000 of assets are put into service during the year.
- Tax credits are available to businesses hiring the long-term unemployed. This credit is expanded to cover employers who hire people out of work for 27 weeks or more and received unemployment benefits. The 40% credit on the first $6,000 in wages apples for those beginning work after 2015.
- Smaller start-ups can opt to claim $250,000 of R & D costs to offset payroll taxes rather than their regular income tax liability. This choice is available to companies in business for five years or less with gross receipts under $5 million.
- The cap on employer-provided tax-free parking stays at $255 a month. The same amount applies to mass transit passes and commuter vans.
- Employees covered by health flexible savings plans can defer up to $2,600.
- There will be tighter rules for preparers of returns that claim the child credit and The American Opportunity Tax Credit. Staring with 2016 tax returns and due in 2017, preparers will have to document how they determined the filer’s claim was valid. These rules are similar to those now in effect for returns claiming the earned income credit. Check out the checklist on Form 8867 for all three credits.
- The tax brackets for 2017 are slightly wider than 2016 largely due to mild inflation from September 2015 through August 2016 but tax rates do not change.
- Standard Deductions will go up slightly in 2017. $12,700 for married couples plus $1,250 for each spouse 65 or older. $6,350 for singles with $7,900 for those singles over 65. Household heads get $9,350 plus $1,550 at age 65 or older. $1,250 more for blind individuals ($1,550 if unmarried and not a surviving spouse.
- Alternative Minimum Tax (AMT) exemptions are going up for 2017. They increase to $84,500 for couples and $54,300 for both singles and heads of household. The phase out zones for the exemptions start at higher income levels and the 28% AMT bracket starts a bit later.
- The annual cap on deductible contributions to Health Savings Accounts (HSAs) is up to $3,400 in 2017 for self-coverage only. The ceiling for family coverage accounts remains $6,750. People born before 1963 can contribute an additional $1,000. Other account features remain the same.
- Adoption credit can now be taken on $13,570 of costs. That’s up $110.
- The 2017 income caps for tax-free Series EE Savings bonds used for education are higher.
- The estate and gift tax exemption for 2017 goes up to $5,490,000. The rate and gift tax exclusion both remain the same.
- Taxpayers working abroad have a larger income exclusion—now $102,100.
It’s a jungle of changes and more are on the way. Those who decide to go it alone should be well prepared for the journey. This may be a good time to consider hiring a guide.