IRS Announces Inflation-Adjusted Amounts for 2017

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Author:  Susan A. Robb, First Republic Trust Company

On October 25, 2017, the IRS released Revenue Procedure 2016-55, which outlined various inflation-adjusted amounts for 2017.  These amounts apply to returns for tax year 2017 that will be filed in 2018.  Some of the key provisions are as follows:

Estate and Gift Tax

  • Estates of decedents who die during 2017 will have a basic exclusion amount of $5,490,000, up from $5,450,000 for estates of decedents who died in 2016.
  • Accordingly, the generation-skipping transfer tax exemption will also rise to $5,490,000 for 2017.
  • The annual exclusion from gift tax will remain at $14,000 for 2017.
  • The exclusion from tax on a gift to a spouse who is not a U.S. citizen will be $149,000 for 2017, up from $148,000 for 2016.

Income Tax

  • Highest tax bracket
    • The 39.6% tax rate will affect single taxpayers whose income exceeds $418,400 ($470,700 for married taxpayers filing jointly) for 2017, up from $415,050 ($466,950 for married taxpayers filing jointly) for 2016.
    • The 39.6% rate will apply to estates and trusts with income of more than $12,500 for 2017, up from $12,400 for 2016.
  • Standard deduction
    • The standard deduction for married filing jointly will rise to $12,700 for 2017, an increase of $100 from 2016.
    • For single taxpayers and married individuals filing separately, the standard deduction will rise to $6,350 for 2017, up from $6,300 for 2016.
    • For heads of households, the standard deduction will rise to $9,350 for 2017, up from $9,300 for 2016.
  • Itemized deductions
    • For individuals, the limitation for itemized deductions for 2017 will begin with incomes of $287,650 or more ($313,800 for married couples filing jointly).
  • Personal exemption
    • The personal exemption for 2017 will remain unchanged at $4,050.
    • The personal exemption is subject to a phase-out that will begin with adjusted gross incomes of $261,500 ($313,800 for married couples filing jointly) and phase out completely at $384,000 ($436,300 for married couples filing jointly).
  • “Kiddie tax”
    • The kiddie tax threshold amounts will remain unchanged for 2017. The kiddie tax applies to dependents under nineteen and dependent full-time students under twenty‑four who have unearned income of more than $1,050 but less than $10,500.
    • As was the case for 2016, for 2017, the first $1,050 of unearned income a child earns will be offset by the $1,050 standard deduction (assuming the child has no earned income), and the next $1,050 of such unearned income will be taxed at the child’s tax rate.
    • All of the child’s unearned income in excess of $2,100 will be taxed at the parent’s tax rate.
  • AMT
    • The Alternative Minimum Tax exemption amount for 2017 will be $54,300 and begin to phase out at $120,700 ($84,500, for married couples filing jointly, for whom the phase out begins at $160,900). The 2016 exemption amount was $53,900 ($83,800 for married couples filing jointly).
    • The AMT exemption amount for estates and trusts will be $24,100 for 2017, up from $23,900 for 2016.
    • For 2017, the 28 percent tax rate will apply to taxpayers, including estates and trusts, with taxable incomes above $187,800 ($93,900 for married individuals filing separately).
  • Foreign earned income exclusion
    • For 2017, the foreign earned income exclusion will be $102,100, up from $101,300 for 2016.
  • Parking and transportation
    • For 2017, the monthly limitation for the qualified transportation fringe benefit will remain at $255.
    • The monthly limitation for qualified parking will also remain at $255.