Back in October, the IRS announced a number of key changes to policies regarding taxes, both for individuals and businesses. As we enter 2017, it is important to anticipate these changes coming into effect. These changes will affect the taxes you file for the fiscal term of 2017. What are the key changes to anticipate this year?
New Tax Brackets
The tax brackets for individuals will be adjusted to take into account inflation and other factors. While these changes are not substantial, it is still necessary to understand them before filing for your taxes. For example, the tax bracket for single taxpayers, for example, has been adjusted slightly. 10% of tax is charged for those earning between $0 to $9,325 per year.
These small changes may not seem significant at first, but they will affect how much you’ll have to pay in taxes when you take into account bonuses and other potentially big incomes you’re expecting in the year 2017. That said, these changes are based on the relatively low inflation we’ve been having over the past couple of years, which means the increase in taxes will not alter your finances by much.
New Standard Deductions
To go alongside the increases in our tax brackets, the IRS is also raising the standard deductions for the fiscal year of 2017. The new standard deduction for individual taxpayers is now $6,350, while that of heads of household is set at $9,350. For couples, a tax deduction of $12,700 can now be claimed.
These increases in deductions are just as small as the increase in tax brackets, but you’ll be able to save on your tax liability nonetheless; that’s always a good thing. They are also relatively easy to understand, which means you don’t have to alter your calculations when adding the deduction.
Changes to Traditional and Roth IRA
This next big change is where things get a little complicated. The IRS will not be charging any tax on your retirement accounts (IRAs) until you start making withdrawals. Your IRAs are great for lowering your tax liabilities. Individual taxpayers can deposit up to $72,000 into a traditional IRA account and enjoy a tax deduction against it. The upper limit for couples is also increased to a whopping $119,000.
Students who are pursuing their Masters in taxation online at universities such as Northeastern University are already preparing for these changes. The best online master of science in taxation graduates are also coming up with new ways to take advantage of the traditional and Roth IRA accounts for tax benefits.
Estate Tax Exemption
One last thing to know about the 2017 tax changes is that the estate tax exemption has been increased to $5.49 million. Similar to the previous changes, this is an increase of $40,000 compared to last year’s rate. It may not be significant, but it is a shift in the right direction for many.
Again, these changes will apply to the taxes you file during the 2017 fiscal year. Make sure you take the time to learn more about the changes that affect your taxes before filing for your return.