Happy 2017! As we begin a new year, it’s always important to re-examine certain elements of your financial plan – especially things that relate to tax planning. Here are a few of the more common items that may impact your financial situation this year.
Social Security & Medicare Part B
For those receiving Social Security, there is a cost of living adjustment in 2017 and the benefit will increase by 0.3%. However, the Medicare Part B premium will also increase from $104.90 per month to $109 per month. So, for most, there will be either no change or a slight decrease to their monthly Social Security benefit.
For those who are on Medicare but not yet receiving their Social Security benefits, they are seeing a 10% increase in their Medicare premiums. The base Part B premium will increase from $121.80 to $134/month.
Social Security Wage Base increase
For workers, the Social Security Wage Base for 2017 will increase from $118,500 to $127,200. Therefore, employees and their employers will pay Social Security taxes on wages up to $127,200, for a maximum Social Security Tax of $7,886 per wage earner.
Medical Deduction Lowered for Retirees
For the vast majority of Americans in 2016, your medical expenses would have had to surpass 10% of your adjusted gross income (AGI) before you could take a deduction. However, taxpayers 65 and older are able to use a previous threshold of just 7.5% of their AGI when itemizing and taking a deduction in 2016. Beginning in 2017, everyone is on the same playing field. If you’re 65 and older, your medical expenses will have to top 10% of your AGI before you can claim itemized medical expenses.
Roth IRAs and Traditional IRAs
The maximum contribution limit for traditional and Roth IRAs will remain $5,500 in 2017 ($6,500 for taxpayers above age 50). However, the income phase-out for Roth IRAs has been increased for 2017. The new income limit is $196,000 for married filers and $133,000 for single tax filers.
401(k) Employee Contributions Remain the Same
The elective deferral to 401(k) plans will remain the same in 2017 at $18,000 per taxpayer ($24,000 for those over age 50).
Health Savings Account Contributions Increased
A HSA is used with a high-deductible healthcare plan to save for qualified medical expenses. For 2017, a family may contribute up to $6,750 ($3,400 for individuals), and if you’re 55 or older, you can contribute an additional $1,000. Those who have Health Savings Accounts should try and maximize the contribution every year.
Notes and Changes for the 2016 Tax Season
The IRS has announced that they will not start accepting electronic returns until January 23. Additionally, paper-filed returns can be mailed prior to that date, but they will not start processing those returns until January 23. Along those same lines, all employers are required to send in their W-2 forms to the Social Security Administration by January 31 (it used to be February 28). The main reason for these changes is to try and decrease the number of fraudulent returns filed early in the tax season.
The tax filing deadline for individual returns this year is Tuesday, April 18. Also, beginning in 2017, partnership tax returns will be due March 15 (up from April 18). Therefore, taxpayers who have to wait on their Schedule K-1s from partnerships should receive them a little earlier.
Large Employers and Health Insurance Providers have until March 2, 2017 to provide Forms 1095-B or 1095-C to individuals, which is a 30-day extension from the original due date of January 31. These forms are helpful in showing health coverage information for filing the tax return, however, they are not required for preparation and filing of the tax return.
For those with coverage provided by the Marketplace, they will receive a 1095-A by January 31. It is required to file the tax return.
Given the changes in 2017, it is important that you take advantage of any financial planning opportunities that are available given your specific situation. Please contact our office if you have any questions or would like to discuss tax planning opportunities that may be relevant to you.