It’s that time of the year again. Time for families to get together and enjoy the holidays, spending quality time decorating the house, listening to holiday music and exchanging gifts.
And, of course, thinking about the year coming to an end and next year’s tax liabilities.
This is especially true for tax preparation professionals with clients already looking ahead to next year.
A depressing thought? Not at all. People who know in advance what to expect in next year’s taxes can enjoy the holidays without having any stress about paying taxes. With taxes, preparation is key.
Getting clients ready for what they may face is a good step to making the tax season go smoothly. Luckily, the IRS has issued the projected tax rates and other assorted tax information. They include the following.
Keep in mind that Congress is still debating tax reform, so some of this could change.
The Consumer Price Index is used as a factor in setting rates, and its increase in 2017 may mean lower rates along with higher tax brackets as well as larger standard deductions. Yes, that’s all good news.
The projected rates look like this for individual taxpayers, based on the following income levels:
- $0-$9,525: 10 percent of taxable income
- $9,525 - $38,700: $952.50, plus 15 percent of the amount over $9,525
- $38,701 - $93,700: $5,328.75, plus 15 percent of the amount over $38,700
- $93,701- $195,450: $19,078.75, plus 28 percent of the amount over $93,700
- $195,451 - $424,950: $47,568.75, plus 33 percent of the amount over $195,450
- $424,951 - $426,700: $123,303.75, plus 35 percent of the amount over $424,950
- Over $426,700: $123,916.25 plus 39.6 percent of the amount over $426,700
Expect the amounts needed to enter a tax bracket to increase, meaning many may fall through to a lower level. For example, in the projections from BNA Bloomberg, a married couple making $237,000 would fall from the 33 percent tax bracket to the 28 percent bracket.
Deductions and Exemptions
Little movement is expected on the personal exemption, with the amount increasing from $4.050 this year to $4,150 in 2018. The exception also is subjected to a possible phase out for those with an adjusted gross income of at least $266,700 ($320,000 for married couples filing jointly).
The standard deduction rates are also expected to tick up slightly to the following amounts:
- Individual: $6,500
- Married filing jointly: $13,000
- Head of household: $9,550
Bloomberg BNA expects the limits for contributions to Individual Retirement Accountants for those under 50 to remain at $5,500. The amount will also hold steady for contributions from those over 50 years old – called “catchup contributions” – at $6,500.
Keep in mind that all of this is subject to tax reform, currently being debated in Congress. There is a possibility of a change in rates at some levels, particularly in higher income brackets.