Yesterday the Internal Revenue Service announced in Revenue Procedure 2016-55 the tax year 2017 annual inflation adjustments. Salient points are as follows:

TAX BRACKETS (single – “S”)

  • If taxable income is between $0 and $9,325 then 10% of taxable income.
  • If taxable income is between $9,326 and $37,950 then $932.50 + 15% of the amount over $9,325.
  • If taxable income is between $37,951 and $91,900 then $5,226.25 + 25% of the amount over $37,950.
  • If taxable income is between $91,901 and $191,650 then $18,713.75 + 28% of the amount over $91,900.
  • If taxable income is between $191,651 and $416,700 then $46,643.75 + 33% of the amount over $191,650.
  • If taxable income is between $416,701 and $418,400 then $120,910.25 + 35% of the amount over $416,700.
  • If taxable income is greater than $418,400 then $121.505.25 + 39.6% of the amount over $418,400.

TAX BRACKETS (married filing joint returns (“MFJ”) and surviving spouses (“SS”))

  • If taxable income is between $0 and $18,650 then 10% of taxable income.
  • If taxable income is between $18,651 and $75,900 then $1,865 + 15% of the amount over $18,650.
  • If taxable income is between $75,901 and $153,100 then $10,452.50 + 25% of the amount over $75,900.
  • If taxable income is between $153,101 and $233,350 then $29,752.50 + 28% of the amount over $153,100.
  • If taxable income is between $233,351 and $416,700 then $52,222.50 + 33% of the amount over $233,350.
  • If taxable income is between $416,701 and $470,700 then $112,728 + 35% of the amount over $416,700.
  • If taxable income is greater than $470,701 then $131,628 + 39.6% of the amount over $470,700.

TAX BRACKETS (head of household – “HOH”)

  • If taxable income is between $0 and $13,350 then 10% of taxable income.
  • If taxable income is between $13,351 and $50,800 then $1,335 + 15% of the amount over $13,350.
  • If taxable income is between $50,801 and $131,200 then $6,952.50 + 25% of the amount over $50,800.
  • If taxable income is between $131,201 and $212,500 then $27,052.50 + 28% of the amount over $131,200.
  • If taxable income is between $212,501 and $416,700 then $49,816.50 + 33% of the amount over $212,500.
  • If taxable income is between $416,701 and $444,500 then $117,202.50 + 35% of the amount over $416,700.
  • If taxable income is greater than $444,501 then $126,950 + 39.6% of the amount over $444,550.

TAX BRACKETS (married filing separately – “MFS”)

  • If taxable income is between $0 and $9,325 then 10% of taxable income.
  • If taxable income is between $9,326 and $37,950 then $932.50 + 15% of the amount over $9,325.
  • If taxable income is between $37,951 and $76,550 then $5,226.25 + 25% of the amount over $37,950.
  • If taxable income is between $76,551 and $116,675 then $14,876.25 + 28% of the amount over $76,550.
  • If taxable income is between $116,676 and $208,350 then $26,111.25 + 33% of the amount over $116,675.
  • If taxable income is between $208,351 and $235,350 then $56,364 + 35% of the amount over $208,350.
  • If taxable income is greater than $235,351 then $65,814 + 39.6% of the amount over $235,350.

PERSONAL EXEMPTION

$4,050/taxpayer phasing out as follows:

  • (S) Beginning with AGI of $261,500 and completely phased out at AGI of $384,000.
  • (MFJ) Beginning with AGI of $313,800 and completely phased out at AGI of $436,300.
  • (HOH) Beginning with AGI of $287,650 and completely phased out at AGI of $410,150.
  • (MFS) Beginning with AGI of $156,900 and completely phased out at AGI of $218,150.

STANDARD DEDUCTION

  • $6,350 (S and MFS)
  • $9,350 (HOH)
  • $12,700 (MFJ and SS)

ADDITIONAL STANDARD DEDUCTION

  • $1,250 for the aged or blind increased to $1,550 if the taxpayer is also unmarried and not a surviving spouse.

PEASE LIMITATIONS

Itemized deductions such as charitable donations, home mortgage interest, state/local taxes and miscellaneous itemized deductions are reduced by the lesser of:

  • 3% of Adjusted Gross Income (“AGI”) above the applicable threshold
  • 80% of the amount of itemized deductions otherwise allowable for the tax year

Limitations kick in at:

  • $261,500 (S)
  • $318,800 (MFJ and SS)
  • $287,650 (HOH)
  • $156,900 (MFS)

MEDICAL EXPENSES

  • The deduction floor is 10% of AGI.

ALTERNATIVE MINIMUM TAX (“AMT”)

  1. (MFS) 26% unless taxable income exceeds $93,900 (28% in that case).
  2. (S, MFJ and HOH) 26% unless income exceeds $187,800 (28% in that case).

Exemptions are:

  •  (S) $54,300 with the phase-out beginning at $120,700 of income.
  • (MFJ and SS) $84,500 with the phase-out beginning at $187,800 of income.

KIDDIE TAX

  • Children under the age of 19 with unearned income (and college students under the age of 24) of $1,050 or less will not be subject to federal income tax on said income. All unearned income in excess of $2,100 is taxed at the parent’s rate.

HEALTH INSURANCE PENALTY

  • The dollar amount used to determine the so-called Obamacare penalty (for taxpayers refusing to obtain the minimum essential health coverage) is $695.

ESTATE/GIFT TAX EXEMPTION

  • $5,490,000/person

ANNUAL GIFT TAX EXCLUSION

  • $14,000/person