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2016 Mileage Rates
- Business: 54 cents per mile (down from 57.5 cents in 2015) - Medical or Moving: 19 cents per mile (down from 23 cents in 2015) - Charitable: 14 cents per mile (no change - set by Congress in 1997) | |
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MINIMAL CHANGES to 2017
401(k) and Pension Limits
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The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan is $18,000 - unchanged from 2016.
The catch-up contribution limit for employees aged 50 and over who participate in these plans is $6,000 unchanged from 2016.
The limit on annual contributions to an Individual Retirement Arrangement (IRA) is $5,500 - unchanged from 2016 and the additional catch-up contribution for individuals 50 and over remains unchanged at $1,000.
The overall limitation for defined contribution plans is increased to $54,000 from $53,000 in 2016.
The covered
compensation limit for qualified retirement plans is increased to $270,000 from $265,000 in 2016.
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Did you move or
change your email address in 2016?
Call or email the office and let us know!
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Greetings and Thanks for Being a Part of Our Firm's Family!
At this time of year, we like to acknowledge all the many things that have made us thankful throughout the year. Since we consider you a member of our firm's family, we want to take the chance to express our gratitude to you for giving us the opportunity to serve you.
We get a great deal of satisfaction from working with clients, whether we're helping you identify tax-saving opportunities, plan for college or retirement, or address critical business concerns. So please accept our sincere thanks for your business! We look forward to continuing our valued relationship with you in the coming year. Please remember that we're here to help when you need us.
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Plan Now to Save Taxes Later
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Even though tax filing time is still a few months away, the fall is the perfect time to start your planning so you can take advantage of all opportunities to minimize your tax bill. Factors that compound the planning challenge this year include political and economic uncertainty, and Congress's all too familiar failure to act on a number of important tax breaks that will expire at the end of 2016.
Some of these expiring tax breaks will likely be extended, but perhaps not all, and as in the past, Congress may not decide the fate of these tax breaks until the very end of 2016 (or later). For individuals, these breaks include: the exclusion of income on the discharge of indebtedness on a principal residence, the treatment of mortgage insurance premiums as deductible qualified residence interest, the 7.5% of adjusted gross income floor beneath medical expense deductions for taxpayers age 65 or older, and the deduction for qualified tuition and related expenses. There is also a host of expiring energy provisions, including among them: the nonbusiness energy property credit, the residential energy property credit, the qualified fuel cell motor vehicle credit, the alternative fuel vehicle refueling property credit, the credit for 2-wheeled plug-in electric vehicles, the new energy efficient homes credit, and the hybrid solar lighting system property credit.
However, there are tried and true approaches that should be considered for most taxpayers. That begins with ensuring you've taken all the deductions that can help reduce your taxable income. Have you maxed out retirement plan contributions, for example? Set aside money for 529 college savings plans or health savings accounts? Considered which charitable donations you want to make before year's end? Those are just a few of options that might help cut your taxes.
At the same time, since tax rates for high-income taxpayers have risen in recent years, it's also smart to investigate ways to lower the income you report this year and to avoid generating passive income. With less than two months left in the year, contact our offices today for advice on steps you can take now that will pay off on April 15.
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Social Security Announcements
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The Social Security Administration (SSA) announced that the maximum amount of wages in 2017 subject to the 6.2% Social Security tax (old age, survivor, and disability insurance) will rise from $118,500 to $127,200, an increase of more than 7%. By comparison, the 2016 wage base was unchanged from 2015. The maximum amount of Social Security tax a taxpayer could pay will therefore increase from $7,347 in 2016 to $7,886.40 in 2017, an increase of $539.40.
The SSA also announced that Social Security beneficiaries will get a 0.3% increase in benefits in 2017, after receiving no increase in 2016. The average retiree will receive an increase of $5 a month.
Among the other increases is the amount a worker under full retirement age can earn before he or she has Social Security benefits reduced. The limit increases from $15,720 a year to $16,920 for 2017, after which $1 in benefits is withheld for every $2 earned above the limit. Last year, this limit also did not increase because of low inflation.
There is no limit on the amount of wages subject to the other portion of the FICA tax, the 1.45% Medicare tax.
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Due Diligence Requirements
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Beginning with the 2016 income tax return, preparers must perform the same kind of Due Diligence with respect to claiming the American Opportunity Tax Credit (AOTC) and Child Tax Credit (CTC) as with the Earned Income Tax Credit (EITC). Therefore, we may be asking you more questions or seeking more documentation than usual if you will be claiming either of these two credits. At a minimum, for the AOTC we will need a properly completed 1098-T sent to you by the university or college.
Speaking of the AOTC, the purchase of laptops and other computers does not necessarily qualify as a Qualified Education Expense. In the case of Mameri v. Commissioner (T.C. Summ. Op. 2016-47), the Tax Court denied the taxpayer's attempt to claim an AOTC for funds expended to buy a computer because it was not required for enrollment or attendance. Most of you don't need to worry too much about this specific case as you only need $4,000 of qualified education expenses to get the maximum AOTC. The credit is allowed for expenses paid in 2016 for an academic period beginning in 2016 or beginning in the first three months of 2017.
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As always, we are honored to handle your tax and accounting matters. Thank you for your business!
Sincerely,
Doris Cloud and Paul Cloud
This newsletter is for general guidance only, and does not constitute tax advice or professional consulting. Before any action, consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information.
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