While many people scramble during pre-April months to gather information and file tax returns, the first quarter of each year is an important time for accounting and business professionals when it comes to tax planning. The Internal Revenue Service has announced 2017 tax rates and other adjustments, providing tax payers and tax service providers with the data required to get a jump on plans.
One change that might impact tax payers — businesses and individuals alike — is an update to the 2017 tax rates for various tax brackets. Slipping into the next highest tax bracket can mean the difference between getting a refund and owing money. For the 2017 calendar year, the highest individual bracket includes those reporting a taxable income of $418,401 or more. Tax burdens for individuals in that bracket start at $121,505.25. Toward the lower end of the individual tax rates brackets, individuals making between $37,951 and $91,900 in 2017 can expect a tax bill between $5,226 and $18,713. Those amounts are before any credits and deductions, making record keeping a priority in 2017 for individuals who want to reduce tax payments. The amounts due are also impacted by filing status, which means married individuals and those filing as head of household follow slightly different tables.
A good piece of news that accompanies the IRS's 2017 tax rates announcement is that standard deductions are up. The 2017 standard deduction for individuals is $6,350, and it's $12,700 for couples filing jointly; that's a $50 and $100 increase respectively over the 2016 amounts. It may not sound like much, but professionals might be able to use that little difference to bring someone's reportable income into a lower bracket, reducing a client's 2017 tax rates. CPAs and financial planners who understand these types of implications can work with individuals to develop 2017 financial management and earnings plans that mitigate the burden of taxes.
Updates to 2017 tax rates aren't the only news from the IRS lately. It also published data about changes to deferrals, exclusions and various deduction options. The Foreign Earned Income Exclusion is up, but the Student Loan Interest Deduction maximum remains at $2,500. The Lifetime Learning Credit is $56,000, and the credit related to child and dependent care expenses remains at $3,000. With many credits getting slight tweaks while others remain the same, it could be easy to make small but costly errors on next year's tax returns. Businesses, individuals and professional tax preparers should always minimize the risk of errors by double checking tax documents, numbers and applicable tax laws.
The 2017 tax rates announcement is just one of many annual changes made by the IRS. Financial and tax professionals must keep up with such information so they can effectively advise clients and assist with money management.
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