Higher tax penalties and lower tax bills projected for 2017.
Bloomberg BNA has released its 2017 projected tax rates, and the news is mostly good for taxpayers who follow the rules.
According to Bloomberg BNA, there are higher tax penalties to contend with in 2017 but rule-following taxpayers also can look forward to higher deductions and credits, which could lower tax bills.
The biggest penalty shock is the loss of U.S. passports for taxpayers with seriously delinquent tax debt.
“The trend toward tougher penalties continues as Congress passed legislation that may revoke the passports of taxpayers with seriously delinquent tax debt,” said George Farrah, Bloomberg BNA Tax & Accounting Editorial Director.
The report from Bloomberg BNA has projections for the income tax brackets, personal exemption, standard deduction as well as tax penalties. It includes more than 320 figures contained in more than 55 Internal Revenue Code provisions. These amounts are based on Bureau of Labor Statistics inflation adjustments.
The Internal Revenue Service is expected to publish its official statement of 2017 inflation-adjusted amounts later this year.
The IRS has a host of penalties for taxpayers who fail to file, fail to furnish correct information returns, and fail to pay tax.
Individuals, companies, trusts and estates are all impacted by these penalties. And in 2017, several penalties were tied to annual inflation adjustments and a few penalties were dramatically increased, according to Bloomberg BNA.
Impact of inflation on 2017 tax brackets
The federal income taxes due on the same income can decrease from year to year because a higher Consumer Price Index (CPI) can push the definition of the tax brackets upward. So someone with the same income from year to year could be pushed into a lower tax bracket the following tax year because of an increase in CPI.
Let’s look at an example, for married taxpayers filing jointly for tax on $233,000.
In 2016, they were in the 33 percent tax bracket and would have paid $52,303 in tax. In 2017, with the tax brackets adjusted for inflation, they are in the 28 percent tax bracket and would pay $52,124.50 in tax, a savings of $178.50.
Higher-income taxpayers will enjoy a measure of relief in 2017 because the top 39.6 percent tax bracket is projected to begin at $470,700 for married taxpayers filing joint returns and at $418,400 for unmarried individuals, an increase from $466,950 and $415,050 respectively in 2016.
The standard deduction and exemption amounts also increase when CPI rises. And while the personal exemption amount for 2017 is projected to remain at $4,050, unchanged from 2016, the standard deduction amounts for 2017 are projected to increase slightly from 2016.
For 2017, married filing jointly and surviving spouses will have a standard deduction of $12,700, heads of household will have a standard deduction of $9,350, and all other taxpayers will have standard deductions of $6,350.
Most taxpayers are entitled to claim a personal exemption for each member of their household. Personal exemptions are phased out for higher-income taxpayers.
With deductions, taxpayers may choose to take the higher of either their itemized deductions or the standard deduction available for their filing status.
Article last modified on May 31, 2017. Published by Debt.com, LLC . Mobile users may also access the AMP Version: What’s In Store For Next Year With Your Taxes? - AMP.