Tax Tips for Individuals
2017 Income Tax Updates
2017 income Thresholds for credits and deductions:
The kiddie tax applies to unearned income for children under the age of 19 and college students under the age of 24. For 2017, the threshold for the kiddie tax - meaning the amount of unearned net income that a child can take home without paying any federal income tax - is $1,050. All unearned income in excess of $2,100 is taxed at the parent’s tax rate.
Some tax credits are also adjusted for 2017. Some of the most common tax credits are:
- Earned Income Tax Credit (EITC). For 2017, the maximum EITC amount available is $6,318 for taxpayers filing jointly who have 3 or more qualifying children. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds, and phase-outs.
- Child & Dependent Care Credit. For 2017, the value used to determine the amount of credit that may be refundable is $3,000 (the credit amount has not changed). Keep in mind that this is the value of the expenses used to determine the credit and not the actual amount of the credit.
- Adoption Credit. For 2017, the credit allowed for an adoption of a child with special needs is $13,570, and the maximum credit allowed for other adoptions is the number of qualified adoption expenses up to $13,570. Phaseouts do apply beginning at taxpayers with modified adjusted gross income (MAGI) in excess of $203,540 and completely phased out for taxpayers with MAGI of $243,540 or more.
- Hope Scholarship Credit. The Hope Scholarship Credit for 2017 will remain an amount equal to 100% of qualified tuition and related expenses not in excess of $2,000 plus 25% of those expenses in excess of $2,000 but not in excess of $4,000. That means that the maximum Hope Scholarship Credit allowable for 2017 is $2,500.
- Lifetime Learning Credit. As with the Hope Scholarship Credit, income restrictions apply to the Lifetime Learning Credit. For 2017, the adjusted gross income amount used to determine the reduction in the Lifetime Learning Credit is $56,000 ($112,000 for joint filers).
Changes were also made to certain tax deductions, deferrals & exclusions for 2017. You'll find some of the most common here:
- Student Loan Interest Deduction. For 2017, the maximum amount that you can take as a deduction for interest paid on student loans remains at $2,500. Phaseouts apply for taxpayers with modified adjusted gross income (MAGI) in excess of $65,000 ($135,000 for joint returns) and is completely phased out for taxpayers with modified adjusted gross income (MAGI) of $80,000 or more ($165,000 or more for joint returns).
- Foreign Earned Income Exclusion. For tax year 2017, the foreign earned income exclusion is $102,100, up from $101,300 for tax year 2016.
- Transportation and Parking Benefits. For 2017, the monthly limitation for the qualified transportation fringe benefit is $255 for transportation in a commuter highway vehicle or any transit pass, as well as qualified parking.
- Medical Savings Accounts. For 2017, the term "high deductible health plan" means, for participants who have self-only coverage in a Medical Savings Account, an annual deductible that is not less than $2,250 but not more than $3,350. For self-only coverage, the maximum out of pocket expense amount is $4,500. For 2017, the term "high deductible health plan" means, for participants with family coverage, an annual deductible that is not less than $4,500 but not more than $6,700. For family coverage, the maximum out of pocket expense is $8,250.