What’s New for 2017 Tax Year

Coral Springs, FL , February 6, 2018

Filing season started January 29, 2018.

Affordable Care Act, a.k.a. Obamacare or ACA

Affordable Care Act is still on the top of the most frequently asked questions this year. The Tax Cuts and Jobs Act signed into law by President Trump on December 22, 2017 has repealed individual mandate that requires most Americans to carry a minimum level of health coverage effective Jan 1, 2019. However, taxpayers who didn’t obtain medical insurance coverage in 2017 & 2018 through Healthcare Marketplace or private insurance companies, or didn’t have coverage through employment, will pay penalty. Please note, if you have Medicare part A, you are considered covered and are not subject to any penalties (and having Medicare tax withheld from your paycheck has nothing to do with Medicare part A). Medicare part B is not considered a minimum level of health coverage.

How much will be the penalty in 2017?

The penalty is the greater of $695 or 2.5% of excess household income over the filing threshold amount. Here is the filing threshold amount for each filing status in 2017:

Single, under 65                                  -           $10,400

Single, over 65                                    -           $11,950

Head of Household, under 65              -           $13,400

Head of Household, over 65                 -            $14,950

Married Filing Jointly, both under 65 -          $20,800

Married Filing Jointly, both over 65   -          $23,300

Married Filing Separately, any age     -           $4,050

What should I do if I received credits towards my medical insurance premiums in 2017?

Expect to receive Form 1095-A from your insurer or Marketplace in the mail and bring it to your tax preparer along with other tax documents. Based on the information in this form the tax preparer will be able to calculate whether you received too much in advance Premium Tax Credit or too little. If too much, you will have to repay it back and if too little, you’ll get extra refundable credit on your tax return.

Due Date of Form 1040

The 2017 tax year Form 1040 filing deadline is April 17, 2018. Extension to file can be obtained before April 17, 2018; it will allow filing individual tax return before October 15, 2018. Please note, extension to file late does not mean extension to pay tax late, therefore all 2017 taxes must be paid before April 17, 2018 to avoid a penalty for late payment.

Due Date of Form 1120, 1120-S and 1065 (Business Tax Returns)

The 2017 tax year Form 1120-S (S Corporation) and 1065 (Partnership) filing deadline for calendar year taxpayers is March 15, 2018. Extension to file can be obtained before March 15, 2018; it will allow filing business tax return before September 17, 2018. C Corporation’s filing deadline (Form 1120) for calendar year filers is April 17, 2018, and 6-month extension can be obtained before that date. Please note, extension to file late does not mean extension to pay tax late.

Standard Deduction

            Married Filing Jointly - $12,700

            Single - $6,350

            Head of Household - $9,350

            Married Filing Separately - $6,350

Additional Standard Deduction for Age 65 and Over and/or Blind (Each)

            Married Filing Jointly - $1,250

            Married Filing Separately - $1,250

            Qualifying Widower - $1,250

            Single - $1,550

            Head of Household - $1,550

Personal Exemption - $4,050 per person    

Standard Business Mileage Rate – 53.5 cents per mile

Income Tax rates made permanent

2017 is the last year with the top individual income tax bracket of 39.6% for single taxpayers with taxable income of $418,401 or more ($470,701 or more for Married Filing Jointly). Starting January 1, 2018 the individual and corporate income tax bracket were significantly lowered thanks to the Tax Cuts and Jobs Act (more on this in our next article).

2017 Capital Gain rates

Single Taxpayers

            0% if income is below $37,950

            15% if income is between $37,951 and $418,400

            20% if income is above $418,401

Married Filing Jointly Taxpayers

            0% if income is below $75,900

            15% if income is between $75,901 and $470,700

            20% if income is above $470,701

There are some exceptions to capital gain rates, for example, from sale of collectibles or small business stock that is taxed at 28%. Unrecaptured Section 1250 gain from selling real property is taxed at a maximum of 25% rate.

FICA Tax rate

An employee’s Social Security portion of FICA remains the same at 6.2% in 20147, and Medicare portion of FICA at 1.45%. Medicare tax is increased by 0.9% for earned income in excess of $250,000 for Married Filing Jointly, $125,000 for Married Filing Separately and $200,000 for any other filing status. Additional 3.8% Medicare tax applies to net investment income in excess of $250,000 for Married Filing Jointly and Qualifying Widowers, $125,000 for Married Filing Separately and $200,000 for any other fling status.

ITINs Expire after 5 years if not used on tax returns

Non-resident individuals who obtained ITIN (Individual Taxpayer Identification Number) after January 1, 2013 please note that your ITIN will expire in 5 years unless you file your tax returns at least 1 (one) time during the last 5 (five) years. If your ITIN was not used on any of the tax returns for 5 (five) consecutive years, it will expire and you would need to re-apply.

Medical Expense deduction

The Adjusted Gross Income (AGI) threshold for deducting medical expenses as an itemized deduction is 7.5% for 2017 and 2018. Beginning January 1, 2019, all taxpayers may deduct only the amount of the total unreimbursed allowable medical care expenses for the year that exceeds 10% of their adjusted gross income.

401(k)/403(b) Deferral Limits

Effective 2017 deferral limits to 401(k)/403(b) plans remained the same at $18,000 per year for individuals under age 50, and at $24,000 for individual taxpayers age 50 and over.

IRA Contribution Phase-Out Range for Active Participation in Employer Plan

The new Modified Adjusted Gross Income (MAGI) limits affecting deductions for traditional IRA contributions in 2017 are: Singles and Heads of Household - $62,000-$72,000, Married Filing Jointly - $99,000-$119,000, Married Filing Separately - $0-$10,000. For Married Filing Jointly with a spouse not active participant in IRA plans MAGI phase-out limit is $186,000-$196,000.

Contribution limit to IRA accounts has not changed for 2017 and remains at $5,500 for taxpayers under 50, and $6,500 for taxpayers age 50 and over.

Roth IRAs Phase-Out Range

The new Modified Adjusted Gross Income (MAGI) limits affecting deductions for Roth IRA contributions in 2017 are: Singles and Heads of Household - $118,000-$133,000, Married Filing Jointly - $186,000-$196,000, Married Filing Separately - $0-$10,000.

Contribution limit to Roth IRA accounts has not changed for 2017 and remains at $5,500 for taxpayers under 50, and $6,500 for taxpayers age 50 and over.

Child Tax Credit

Child Tax Credit remains at $1,000 per child. Child Tax Credit phase-out begins for Single and Head of Household at $75,000, for Married Filing Jointly at $110,000 and for Married Filing Separately at $55,000.

Estate and Gift Tax Exclusion