Form 1040

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 age 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 separately (MFS)

$0 - $10,000

$0 - $10,000

Note: The 2017 phaseout 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 phaseout 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).

Note: 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

Note: 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 phaseout threshold

Single/HOH

$119,700

$120,700

MFJ

$159,700

$160,900

MFS

$79,850

$80,450

26% on AMTI* up to this amount, 28% on AMTI above this amount

MFS

$93,150

$93,900

All others

$186,300

$187,800

*Alternative minimum taxable income

For more information on this topic, contact the advisors at MFA Asset Management today.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017