Bloomberg BNA has just published its 2017 Projected Tax Rates along with a projection of tax items that have been adjusted for inflation.
That means that the cost of noncompliance will increase. The good news is that individuals and businesses can look forward to lower tax liability because of higher deductions and credits. You can view the full report here.
Congress has passed legislation that may revoke the passports of taxpayers who currently have serious delinquencies in tax debt. This has caused a trend toward higher penalties. Congress has provided more predictability for business taxpayers by returning to annual increases for the business expensing limits.
The report includes projections for income tax brackets, personal exemption, standard deduction, and penalties that will give taxpayers and tax planners a reference to save more tax dollars in 2017. It also includes over 320 that are contained in more than 55 Internal Revenue code provisions. The official statement from the IRS will be published later this year. Amounts are based on the Bureau of Labor Statistics inflation adjustments.
Kevin Thompson, CPA says “Watch out for more penalties.”
The IRS code will be imposing penalties for failure to file returns, failure to furnish information returns, and failure to pay tax. This will affect individuals, companies, trusts, and estates. Several of these penalties have been tied to annual inflation adjustments and some were increased. This raises the possibility that there will be even higher penalties for noncompliance coming in the future.
Tax preparers may also see their penalty costs soar. You can see a complete list in the full report.
How tax brackets are affected
Because the higher Consumer Price Index (CPI) is higher, it pushes the definition of brackets higher. It will also increase the standard deduction and exemption amounts.
Those who are in higher income brackets will have some relief in 2017 because the top 39.6 % bracket will begin at $470,700 for those who are married and filing jointly and $418,400 for single taxpayers.
Personal Exemptions and the Standard Deduction
Thompson says “Most taxpayers may claim a personal exemption for every member of their household. In 2017, this should remain unchanged.” The personal exemption for taxpayers with higher income has been phased out. Taxpayers may choose either the higher of their itemized deductions or take the standard deduction which varies according to filing status. Standard deduction amounts will be somewhat higher in 2017 than in 2016
Alt Minimum Tax (AMT)
Inflation adjustments will make the difference between having to pay AMT or not for some taxpayers.
Estate and Gift Tax Exclusions
Bloomberg is projecting that the estate tax basic exclusion for those who die in 2017 will be $5,49 million. It was $5.45 million in 2016. The annual gift tax exclusion will remain the same ($14,000) in 2017. Thompson says “high net worth individuals should consider large gifts to family members. This large estate exclusion can disappear anytime.”