Careful planning throughout the year can assist you in reducing the taxes you pay - as well as help you achieve your financial goals. This brief guide provides a basic overview of some of the tax rates, credits,
deductions and related considerations that may apply to you.
Tax planning should not be done in isolation, but instead should be driven by your overall financial goals and integrated with your total financial plan. By developing and implementing appropriate strategies to
lessen or shift current and future tax liabilities, you can improve your prospects of meeting both long- and short-term objectives. For example, accurately projecting your income taxes can help you determine the cash
flow available to you in the coming year.
Keep in mind that tax laws are often complex and frequently change. As a consequence, you should consult your tax advisor before making investment and tax decisions.
Year-End Considerations
While year-round tax planning is important, you may find extra benefits by gathering all your tax-related facts as the year ends. You may, for example, have a clearer picture of your capital gains and losses,
as many mutual fund companies issue distribution estimates by
mid-December. The end of the year is a fine time to:
Examine your portfolio's asset allocation
Rebalance your portfolio, if warranted
Assess holdings (Are they performing as expected?)
Add up tax-loss harvesting possibilities
Max out contributions to 401(k)s or other tax-advantaged retirement accounts
Make last-minute charitable donations
Pay deductible taxes for 2016 early, if it helps reduce adjusted gross income
If the alternative minimum tax applies to you, take AMT-appropriate actions
Investors should consult a tax professional about their specific situation.
2017 Income Tax Changes
Careful planning throughout the year can assist you
in reducing the taxes you pay - as well as help you
achieve your financial goals. This guide provides an
overview of tax rates, credits, deductions and related
considerations that may apply to you.
Tax planning should not be done in isolation, but
instead should be driven by your overall financial
goals and integrated with your total financial plan. By
developing and implementing appropriate strategies
to lessen or to shift current and future tax liabilities,
you can improve your prospects of meeting longand
short-term objectives. For example, accurately
projecting your income taxes can help you determine
the cash flow available to you in the coming year.
Keep in mind that tax laws are often complex and
frequently change. As a consequence, you should
consult your tax advisor before making investment
and tax decisions.
SOCIAL SECURITY CHANGES
As a result of the Bipartisan Budget Act of 2015,
"Restricted Application" and "File and Suspend"
strategies are being and have been phased out.
Restricted Application - Available to individuals
born on or before January 1, 1954. This strategy
can be elected when the individual reaches their
full retirement age or later. Restricted application
creates an opportunity for one member of a couple
to claim a spousal benefit, while allowing their
own benefit to grow until age 70. At age 70 they
normally transition from a spousal benefit to their
own benefit, if higher.
File and Suspend - Before its expiration on April
30, 2016, this strategy allowed one spouse to file
for their Social Security benefit at their full retirement
age and immediately suspend receiving their
benefit. The act of filing and immediately suspending
their benefit allowed the other spouse to begin
drawing a spousal benefit. This process also
allowed both of their worker benefits to defer credits
up until age 70. At age 70 they would then switch
to their own worker benefit, if higher.
IRS RULES FOR LATE 60-DAY ROLLOVERS
When redepositing funds from your IRA, Roth IRA
or other plan, individuals receive a check and have
a 60-day period in which to roll over those funds.
Now, with Revenue Procedure 2016-47 (released in
August 2016), individuals who miss the 60-day rollover
period can self-certify that they qualify for a
waiver, so long as they meet a few criteria:
1. There can be no prior denial by the IRS
for a waiver.
2. The late rollover must be attributed to one of
the 11 reasons listed in the form provided by
the IRS. (Go to irs.gov and search "2016-47"
for the list of reasons.)
3. The funds must be redeposited into an
IRA account "as soon as practical after the
reason or reasons no longer prevent the
taxpayer from making the contribution." This
guideline does include a 30-day safe harbor
window.
QUALIFIED CHARITABLE DISTRIBUTION
Since 2006, IRA owners who are at least 70½ years
old could make a qualified charitable distribution
(QCD) of up to $100,000 directly from an IRA to a
charity without having to include the distribution in
taxable income. Legislation has made these QCD
rules permanent.
Donating IRA funds directly to qualified charities
allows the IRA holder or beneficiary to avoid taking
possession of the funds and the tax bill that comes with them. It also allows the extra income to be
excluded from tax formulas for Medicare premiums
or for the Pease limitation on itemized deductions.
In brief, a qualified charitable distribution (QCD)
from an IRA can be made only by an IRA owner
or beneficiary age 70½ or older, and can total up to
$100,000. A spouse age 70½ with an IRA could give
up to $100,000 as well. A QCD can be used to meet
your required minimum distribution. The funds, which
cannot come from active SEP or SIMPLE IRAs, must
be sent directly to the qualified (IRS approved) charitable
organization. [The gift cannot be made to a
private foundation, donor-advised fund or supporting
organization (as described in IRC Section 509(a)(3)).
The gift cannot be made in exchange for a charitable
gift annuity or to a charitable remainder trust.]
AGI THRESHOLD
As of January 1, 2017, taxpayers may deduct only
the amount of the total unreimbursed allowable
medical care expenses for the year that exceeds
10% of their AGI.
To write off medical expenses, deductions must
be itemized. While it may seem unlikely that
taxpayers will have an opportunity to write off
expenses, there are some scenarios when this
rule can prove beneficial. For example, if medical
expenses are particularly high due to a serious
illness or accident. Or, the AGI may be unusually
low as a result of being out of work for part of the
year or a low taxable retirement income.
Income Tax Rates
Taxable income is income after all deductions, including either itemized deductions or the standard deduction, and exemptions.
Married Taxpayer Joint/Surviving Spouse
Taxable Income
Pay
Percentage of Excess
Of Amount Above
Less than $18,650
N/A
10
$0
18,650 – 75,900
$1,865.00
15
18,650
75,900 – 153,100
10,452.50
25
75,900
153,100 – 233,350
29,752.50
28
153,100
233,350 – 416,700
52,222.50
33
233,350
416,700 – 470,700
112,728.00
35
416,700
More than 470,700
131,628.00
39.6
470,700
Single Taxpayer
Taxable Income
Pay
Percentage of Excess
Of Amount Above
Less than $9,325
N/A
10
$0
9,325 – 37,950
$932.50
15
9,325
37,950 – 91,900
5,226.25
25
37,950
91,900 – 191,650
18,713.75
28
91,900
191,650 – 416,700
46,643.75
33
191,650
416,700 – 418,400
120,910.25
35
416,700
More than 418,400
120,505.25
39.6
418,400
Head of Household
Taxable Income
Pay
Percentage of Excess
Of Amount Above
Less than $13,350
N/A
10
0
13,350 – 50,800
1,335.00
15
13,350
50,800 – 131,200
6,952.50
25
50,800
131,200 – 212,500
27,052.50
28
131,200
212,500 – 416,700
49,816.50
33
212,500
416,700 – 444,550
117,202.50
35
416,700
More than 444,550
126,650.00
39.6
444,550
Personal and Dependency Exemptions
Exemptions per person:
$4,050
Standard Deductions*
Single
Head of Household
Joint
*Extra Deduction if Blind or over 65
Single or head of household
All other statuses
$6,350
9,350
12,700
1,550
1,250
Individual Retirement Accounts
Generally, traditional IRA contributions are fully deductible unless you or your spouse is covered by a workplace retirement plan, in which case the following deduction phaseouts apply. If neither individual nor spouse is covered by a plan, you can deduct up to
$6,000 each ot MAGI, whichever is less.
Traditional IRA: Deductability of Contributions
Status
Modified Adjusted Gross Income
Deduction
Married Filing Jointly*
$0 – 104,000
104,000 – 124,000
More than 124,000
$6,000 Maximum
Partial
None
Single
$0 – 65,000
65,000 – 75,000
More than 75,000
$6,000 Maximum
Partial
None
For Noncovered Spouse**
$0 – 198,000
198,000 – 208,000
More than 208,000
$5,500 Maximum
Partial
None
*If neither individual or spouse is covered by a plan, you can deduct up to $6,000 each or MAGI, whichever is less.
**Applies to individuals whose spouses are covered by a workplace plan but are not covered themselves and you are married filing jointly.
Roth IRA: Eligibility of Contributions
Contributions made to a Roth IRA are not deductible, unlike contributions made to a traditional IRA, and there is no age restriction on making contributions. An individual may contribute up to $6,000 to the Roth IRA,
subject to income phase-out limits.
Status
Adjusted Gross Income
Deduction
Married
$0 – 198,000
198,000 – 208,000
More than 208,000
$6,000 Maximum
Partial
None
Single
$0 – 125,000
125,000 – 140,000
More than 140,000
$6,000 Maximum
Partial
None
Catch-Up Contributions If you have either a traditional or a Roth IRA and attain age 50 or older during the tax year, an additional $1,000 may be contributed.
IRA & Roth Contribution
Maximum Contribution
Catch-up Contribution
$6,000
$1,000
Trust and Estate Income Tax Rates
If taxable income is:
Your tax is:
Not over $2,600
10% of taxable income
Over $2,600 to $9,450
$260 plus 24% of the excess over $2,600
Over $9,450 to $12,950
$1,904 plus 35% of the amount over $9,450
Over $12,950
$3,129 plus 37% of the amount over $12,950
Education Planning
Education Credits
American Opportunity Credit (formerly Hope Credit)*
Up to 100% of the first $2,000 and 25% of the next $2,000 for a total of $2,500 maximum credit per eligible student per year. Reduction for MAGI between $80,000 - $90,000 for single filers and $160,000 - $180,000 for joint filers.
Lifetime Learning Credit
Up to 20% of the first $10,000 (per taxpayer) maximum of $2,000 of qualified expenses paid in 2020. Reduction for MAGI between $58,000 - $68,000 for single filers and $116,000 - $136,000 for joint filers.
*Can be claimed for up to four years.
Student Loan Interest Deduction
Maximum Deduction
$2,500
MAGI Phase-Outs
Married Filing Jointly
Single
$140,000 – $170,000
$70,000 – $85,000
Tax Credits
Annual Exclusion for Gifts
2020
$15,000
The information provided in these web pages is based on internal and external sources believed reliable; however, the accuracy and completeness of the information is not guaranteed and the figures may have changed since the time of printing. Examples are hypothetical illustrations and not intended to reflect the actual performance of any particular security. Please consult your tax advisor for questions relating to your individual situation.