Fortunately your taxes aren’t due. Not yet. You have until April 18 to file your 2016 tax return if you haven’t done so. For most of us (4 out of 5 of us, according to the IRS), a refund is waiting. This is largely because the IRS offers a variety of tax deductions, exceptions and credits to lower your tax bill. Many of these are adjusted for inflation, so they often change from year to year.
Tax year 2017 has several annual inflationary adjustments to consider. Here’s a breakdown of some key changes to help you plan for your taxes. Keep in mind that these are for the 2017 tax year – they’re not rates you’ll use to prepare your 2016 returns.
The big change for everyone is in the individual income tax brackets, which have been adjusted for inflation. They’re typically adjusted so you can earn more without moving into a higher tax bracket. Inflation has been nominal, so there wasn’t a significant shift upwards in the tax schedule. Still, if you were on the cusp, it’s good to be aware of where you might be now. You can see 2017 tax bracket tables here.
More good news is that your standard deduction will go up a smidge in 2017. Individual filers and heads of households will receive a standard deduction of $6,350 and $9,350, respectively, up $50 from 2016. Couples filing jointly get a $100 year-over-year bump to $12,700 in 2017. This may not seem like much but anything that will reduce your tax liability without you having to do a thing is money in the bank.
There are several other important changes that may also affect your taxes, including that traditional and Roth IRA phaseouts will be adjusted higher and health saving accounts (HSA) contributions have increased for individuals. You can find more detailed information about those and other changes here. Please see your tax advisor to determine how this information may apply to you.