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IRS Announces 2017 Cost of Living Adjustments

Oct 31Jeff Matthews
Cost of living adjustments

The IRS just announced the 2017 cost-of-living adjustments. There re numerous adjustments but some of the highlights are discussed below.

The IRA contribution limits remain unchanged at $5,500 with the catch-up still at an additional $1,000, while the IRA phase-out for IRA contributions also climbed by $1,000 to $99,000 to $119,000 (married) and $62,000 to $72,000 (single head of household.)

401(k) contribution limits are also unchanged at $18,000 and $6,000 for catch-ups. The total that the employer and employee can contribute to a plan increased by $1,000 to $54,000.  The earnings limitation for 401(k) compensation increased from $265,000 to $270,000.  Highly compensated employees continue to be defined at those making over $130,000.

The maximum amount you can contribute to a Health FSA climbed by $50 to $2,600. Additional changes touch Qualified Transportation Fringe Benefits, Adoption Assistance, and Small Business Health Care Tax Credits.  The penalty for failing to provide minimum essential coverage stays $695.

The 2017 income tax brackets will be:

Individual Income Tax Brackets
Rate Singles Head of Household Joint filers Married filing separate
10% $1–$9,325 $1–$13,350 $1–$18,650 $1–$9,325
15% $9,326–$37,950 $13,351–$50,800 $18,651–$75,900 $9,326–$37,950
25% $37,951–$91,900 $50,801–$131,200 $75,901–$153,100 $37,951–$76,550
28% $91,901–$191,650 $131,201–$212,500 $153,101–$233,350 $75,551–$116,675
33% $191,651–$416,700 $212,501–$416,700 $233,351–$416,700 $116,676–$208,350
35% $416,701–$418,400 $416,701–$444,550 $416,701–$470,700 $208,351–$235,350
39.6% More than $418,400 More than $445,550 More than $470,000 More than $235,350

The standard deductions increased to $12,700 for joint filers (up $100), $6,350 for single filers (up $50), $9,350 for heads of household (up $50). The personal exemptions remain at $4,050.

Numerous other areas of the tax code have been adjusted for inflation and I suggest you discuss them with your tax advisor and refer to Notice 2016-62[1] and Rev. Proc. 2016-55[2].

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[1] Notice 2016-62 – 2017 limitations adjusted as provided in Section 415(d), etc.  https://www.irs.gov/pub/irs-drop/n-16-62.pdf

[2] Rev. Proc. 2016-55 =  https://www.irs.gov/pub/irs-drop/rp-16-55.pdf

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