Tax Ceilings, Rates and Limitations for 2017
Here are updated tax limits for 2017 for selected items.
Social Security maximum wage base for 2017 increased to $127,200. Amounts withheld at the 6.2% rate from an employee will now be $7,886.40 with the employer matching it. A self-employed person will pay the employee’s and employer’s shares which will be almost $15,772.80. The 1.45% Medicare tax is in addition to this and there is no salary cap on that. The employer will match employee’s amount and the self-employed will pay both shares. The employee’s total withholding tax will be7.65% and self-employed will be 15.3% on amounts up to the wage base and 1.45% and 2.9% on amount over that.
Capital Gains: Maximum rate is 20% plus 3.8% if the Net Investment Income Tax applies. The 0% rate will apply to extent ordinary income is taxed at a rate below 25%. A 15% rate is for individuals taxed at a 25% ordinary income tax rate or higher but below the 39.6% rate. The rate is 25% for unrecaptured Section 1250 depreciation; and 28% for long term sales of collectibles.
Alternative Minimum Tax exemption for those married filing jointly will be $84,500 and for singles $54,300. The exemption starts to phase out when joint and single income exceeds $160,900 and $120,700.
Personal exemption is $4,050 and starts to phase out when joint and single AGI reaches $313,800 and $259,400.
Section 179 Depreciation: $510,000 with this amount being reduced when the cost of qualifying property exceeds $2,030,000. Note that this was one of my proposals to Congress in 1980!
Gift Tax Annual Exclusion: $14,000 per person receiving a gift. This is doubled if there is a consenting spouse.
Estate and Gift Tax Lifetime Exemption: $5,490,000. For gifts this is doubled if there is a consenting spouse.
IRA contribution limit is $5,500 and an extra $1,000 for those who are age 50 and over. The limits apply for both traditional and Roth IRAs. There are phase outs for traditional IRAs for taxpayers covered by an employer plan; and for Roth IRAs based on AGI.
401k, 403b and most 457 plan contribution limits: $18,000 plus $6.000 for taxpayers past their 50th birthday.
Defined contribution limits: $54,000 plus $6,000 for those past their 50th birthday. SEP plans are not eligible for the over age 50 additional contributions.
Solo 401k plan combined with a SEP: $54,000 plus $6,000 for those past their 50th birthday.
SIMPLE plan limits are $12,500. The extra over age 50 amount is $3,000.
Medicare Part B premiums for those over age 65: Joint Modified AGI up to $170,000, $134.00 per month; MAGI over $170,000 up to $214,000, $187.50; MAGI over $214,000 up to $320,000, $267.00; MAGI over $320,000 up to $428,000, $348.30; MAGI over $428,000, $428.60. The single limits are half of the joint MAGI amounts for the premiums shown. These amounts will be reduced somewhat if you have the Medicare premiums deducted from your monthly Social Security benefits. Tip: These payments are deductible as medical insurance premiums which is especially beneficial for self-employed taxpayers. The Modified AGI reported on your 2015 tax return determines your 2017 premiums. To reduce your MAGI for 2017 (almost too late for 2016) consider transferring part or all of your 2017 Required Minimum Distributions (up to $100,000) directly to a charity. This might help reduce your 2019 premiums. You should consult with a tax advisor for other strategies to reduce MAGI. Starting early in the year will give you the best opportunities for tax planning.
Retirement plan tip: Consider making your 2017 contributions in January 2017 or as early in the year as you could so the tax deferred earnings start. Also, some plan contributions for 2016 can be made in 2017 and some of the plans can be opened in 2017 for the 2016 tax year. Further, do not overlook IRA contributions for non-working spouses. Self-employed people with no employees should consider a solo 401k combined with a SEP – if you qualify for 2016, open it ASAP! This must be done before Dec 31, 2016. Check with your tax advisor about what applies to you.
There are other items but these cover the most widely items I get questions about. All of these amounts and limits should be checked for amount and applicability with your tax advisor.
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