By Krista McBeath, McBeath Financial Group
Every year, the Internal Revenue Service announces cost-of-living adjustments that affect contribution limits for retirement plans, thresholds for deductions and credits, and standard deduction and personal exemption amounts. Here are a few of the key adjustments for 2017.
Retirement plans
- Employees who participate in 401(k), 403(b), and most 457 plans can defer up to $18,000 in compensation in 2017 (the same as in 2016); employees age 50 and older can defer up to an additional $6,000 in 2017 (the same as in 2016).
- Employees participating in a SIMPLE retirement plan can defer up to $12,500 in 2017 (the same as in 2016), and employees aged 50 and older will be able to defer up to an additional $3,000 in 2017 (the same as in 2016).
IRAs
The limit on annual contributions to an IRA remains unchanged at $5,500 in 2017, with individuals age 50 and older able to contribute an additional $1,000. For individuals who are covered by a workplace retirement plan, the deduction for contributions to a traditional IRA is phased out for the following modified adjusted gross income (AGI) ranges:
2016 2017
Single/head of household (HOH) $61,000-$71,000 $62,000-$72,000
Married filing jointly (MFJ) $98,000-$118,000 $99,000-$119,000
Married filing seperately (MFS) $0-$10,000 $0-$10,000
The 2017 phase-out range is $186,000 – $196,000 (up from $184,000 – $194,000 in 2016) when the individual making the IRA contribution is not covered by a workplace retirement plan but is filing jointly with a spouse who is covered.
The modified AGI phase-out ranges for individuals making contributions to a Roth IRA are:
2016 2017
Single/HOH $117,000-$132,000 $118,000-$133,000
MFJ $184,000-$194,000 $186,000-$196,000
MFS $0-$10,000 $0-$10,000
Estate and gift tax
- The annual gift tax exclusion remains at $14,000.
- The gift and estate tax basic exclusion amount for 2017 is $5,490,000, up from $5,450,000 in 2016.
Personal exemption
The personal exemption amount remains at $4,050. For 2017, personal exemptions begin to phase out once AGI exceeds $261,500 (single), $287,650 (HOH), $313,800 (MFJ), or $156,900 (MFS).
These same AGI thresholds apply in determining if itemized deductions may be limited. The corresponding 2016 threshold amounts were $259,400 (single), $285,350 (HOH), $311,300 (MFJ), and $155,650 (MFS).
Standard deduction
These amounts have been adjusted as follows:
2016 2017
Single $6,300 $6,350
HOH $9,300 $9,350
MFJ $12,600 $12,700
MFS $6,300 $6,350
The 2016 and 2017 additional standard deduction amount (age 65 or older, or blind) is $1,550 for single/HOH or $1,250 for all other filing statuses. Special rules apply if you can be claimed as a dependent by another taxpayer.
Alternative minimum tax (AMT)
AMT amounts have been adjusted as follows:
2016 2017
Maximum AMT exemption amount
Single/HOH $53,900 $54,300
MFJ $83,800 $84,500
MFS $41,900 $42,250
Exemption phase-out threshold
Krista McBeath is the founder and president of McBeath Financial Group in Normal. The firm covers all areas of financial management, specializing in retirement and financial planning solutions. For more information, you may call 309-808-2224, e-mail Krista@mcbeathfinancial.com, or visit their website at www.McBeathFinancialGroup.com.
Fee-based financial planning and investment advisory services are offered by McBeath Financial Group, a Registered Investment Advisor in the State of Illinois. Tax preparation and insurance products are offered through McBeath Tax and Financial Services, LLC. McBeath Financial Group and McBeath Tax and Financial Services, LLC