Income Tax 2017
2017 Federal Individual Income Tax Rates, Deductions and Exemptions
Tax return due: Tuesday April 17, 2018, unless you file an extension with form 4868 October 15, 2017.
You have to pay federal income tax and on top of that state and local income tax in most states. Your tax bracket depends upon your income and your tax-filing classification.
There are seven federal income tax brackets (ranging from 10% to 39.6%), the brackets per state vary. There are five classifications: Single, Married Filing Jointly, Qualified Widow or Widower, Married Filing Separately, and Head of Household.
Below more tax jargon explained, what is/are the:
- Individual federal income brackets and tax rates?
- Standard exemptions: personal and your dependents?
- Personal standard exemptions: standard and/or blind/elderly?
- Standard or itemized deductions?
- Personal filing thresholds?
- Personal Exemption Phaseout (PEP) thresholds?
- Earned income tax credit (EIC or EITC)?
- Alternative Minimum Tax (AMT)?
- Kiddie Tax?
- Adoption Credit?
- Child Credit?
- American Opportunity Credit (formerly Hope Scholarship Credit)?
- Lifetime Learning Credit?
- Federal Income Tax 2016
|10%||$0 - $9,325|
|15%||$9,326 - $37,950|
|25%||$37,951 - $91,900|
|28%||$91,901 - $191,650|
|33%||$191,651 - $416,700|
|39.6%||$418,401 or more|
Married Filing Jointly/Qualifying Widow(er)
|10%||$0 - $18,650|
|15%||$18,651 - $75,900|
|25%||$75,901 - 153,100|
|28%||$153,101 - $233,350|
|33%||$233,351 - $416,700|
|35%||$416,701 - $470,700|
|39.6%||$470,701 or more|
Married Filing Separately
|10%||$0 - $9,325|
|15%||$9,326 - $37,950|
|25%||$37,951 - $76,550|
|28%||$76,551 - $116,675|
|33%||$116,676 - $208,350|
|35%||$208,351 - $235.350|
|39.6%||$235,351 or more|
Head of Household
|10%||$0 - $13,350|
|15%||$13,351 - $50,800|
|25%||$50,801 - 131,200|
|28%||$131,201 - $212,500|
|33%||$212,501 - $416,700|
|35%||$416,701 - $444,550|
|39.6%||$444,551 or more|
For yourself (personal exemption), spouse (if you are married) or your dependents: $4,050 per person, the same as 2016.
The personal exemption is not a subject to federal income tax, but it is the minimal amount of money you need to get by at a subsistence level.
|Elderly or Blind |
|Married Filing Jointly||$12,700||$1,250|
|Married filing separately||$6,350||$1,250|
|Head of Household||$9,350||$1,550|
Standard Deduction for Dependents:
$1050 or sum of $350 and dependent's earned income, not to exceed the standard deduction for the dependent's filing status.
Individual tax payers are allowed a choice when preparing their income tax returns. They can itemize their deductions from a list of allowable items and subtract those itemized deductions and their personal exemption deductions from their AGI to get their Taxable Income. Or they can choose to subtract the standard deduction and their personal exemptions. The choice between standard and itemized deduction depends on:
- a comparison between both types of deductions: what choice gives more money to subtract?
- do you have kept records of the items you want to subtract? - you need them as prove.
- if you are filing as 'Married', Filing separately', and your spouse itemizes, you have to do that to.
Option Standard Deduction and Personal Exemptions
Example 1: a single without children pays income tax above a filing threshold of $10,350. This threshold is the Standard Deduction of $6,350 plus the Personal Exemption of $4,050. So, a single would actually pay 0% over the first $10,400 of income. After subtracting this amount from her or his income, the tax brackets start to work. Over the next $9,325 a single pays 10% tax; 15% over the amount between 9,326 and $37,950 and so on, depending on your Personal Exemption Phaseout, or PEP threshold.
You can take an exemption for yourself - the personal exemption - or for your dependents, but you cannot do that if you can be claimed as a dependent by another taxpayer - even if this taxpayer doesn't actually claim you as a dependent. If you are married you can claim an exemption for your spouse filing Jointly or Separately - only if another taxpayer doesn't claim your spouse as a dependent. You cannot claim a person dependent unless that person is your Qualifying Child or qualifying relative.
You must always list the social security number (SSN) of any dependent for whom you claim an exemption. If you don't list the SSN the exemption could be denied.
Threshold, file when Gross Income Exceeds
|65 or older||$11,950|
|Head Household||Under 65||$13,400|
|65 or older||$14,950|
|Married Filing Jointly||Under 65 both spouses||$20,800|
|65 or older one spouse||$22,050|
|65 or older both spouses||$23,300|
|Married Filing Separately||any age||$4,050|
Qualifying Widow(er) with
|65 or older||$18,000|
The personal exemption phases out, or gradually reduces by 2 percent for each $2,500 (or fractional portion of $2,500) by which your adjusted gross income for the year exceeds a threshold amount. For people who file the married filing separately option, the personal exemption phases out by 2 percent for each $1,250 of their adjusted gross income over the threshold.
|Filing status||AGI Beginning Phaseout||AGI Completed Phaseout|
|Married filing jointly||$313,800||$436,300|
|Married filing separately||$156,900||$218,150|
|Head of Household||$287,650||$410,150|
Example 1: you file as head of household with an adjusted gross income (AGI) of $300,775 and you claim two personal exemptions: one for yourself and one for your son. Your relevant PEP threshold is $287,650, so your AGI exceeds the threshold by $13,125 ($300,775 - $287,650). You have to divide this amount of $13,125 by $2,500 which is 5.25, which rounds up to 5. Your reduction is 10% (5x2%) of $8,100 for your two personal exemptions, which is $810. That means $8,100 original exemption minus the phase out of $810 = $7,290 personal exemption allowed for this year.
Example 2: you are part of a married couple filing jointly with two children. Your adjusted gross income (AGI) is $347,000. Your relevant PEP threshold is $313,800, so your AGI exceeds the threshold by $33,200 ($347,000 - $313,800). Divide this excess by $2,500 = 13.28, which rounds up to 13. Your reduction is 26% (=13x2%) of $16,200 (4 x the personal exemption of $4,050), which is $4,212. That means you $16,200 original exemption minus the phase out of $4,212= $11,988 personal exemption allowed for this year.
If you have a low or moderate income you can supplement your earnings with the EITC. If you qualify for the EITC you can reduce your taxes and increase your tax refund. .
2017 Earned Income and Adjusted Gross Income (AGI) must be less than:
|If filing||Childless||1 child||2 children||3 or more children|
|Single, Head of Household, or Widow(er)||$15,010||$39,617||$45,007||$48,340|
|Married filing jointly||$20,600||$45,207||$50,597||$53,930|
|Maximum credit amount||$510||3,400||$5,616||$6,318|
For the tax year 2017, the EITC begins to phase out at an adjusted gross income (AGI) of $8,340 for individuals without qualifying children.
|EITC credit amount - income phase-in and out:||Childless||1 child||2 children||3 or more children|
|Phase-in ends - Single/Married filing Jointly||$6,670||$10,000||$14,040||$14,040|
|Single: Phase-out begins - ends||$8,340 -$15,010||$18,340 - $39,617||$18,340 - $45,007||$18,340 - $48,340|
|Married filing jointly: Phase-out begins - ends||$13,930 - $20,600||$23,930 - $45,207||$23,930 - $50,597||$23,930 - $53,930|
The income threshold for itemized deductions - the Pease limitations, named after former Rep. Don Pease - will begin with incomes of $259,4000 for single filers.
Income threshold for itemized deductions:
|Married filing jointly||$313,800|
|Head of household||$287,650|
|Married filing separately||$156,900|
If the Pease limitations apply, the total of your itemized deductions is reduced by the lesser of:
- 3% of your AGI above the applicable threshold,or
- 80% of the amount of itemized duductions allowable for this tax year
Pease limitations apply to charitable donations, home mortgage interest deduction, state and local tax deductions and various itemized deductions, but not to medical expenses, investment expenses, certain losses or theft.
The AMT exemption amounts are adjustable to inflation. Figuring out if you are subject to the AMT means calculating your tax liability twice, you can do that on Form 6251. If the tax calculated on Form 6251 is higher than what you calculated on your regular tax form, you have to pay the difference as AMT in addition to the regularly calculated income tax.
AMT Exemption amounts and phaseouts
|Filing status||Exemption amount||Phase-out starts at:|
|Single/Head of household||$54,300||$120,700|
|Married filing separately||$42,250||$80,450|
|Married filing jointly/Qualifying widow(er)||$84,500||
The credit allowed for an adoption of a child with special needs is $13,570. The maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,570. Phaseout apply with a modified adjusted gross income over $203,540. The credit is completely phased out with a adjusted gross income of more than $243,540.
The child credit can be worth as much as $1,000 per child and is al least partially refundable if you had an earned income of more than $3,000. The tax credit will phase out at an AGI of $75,000 for single filers and head of households, $110,000 if you are married jointly.
The American opportunity tax credit, which expanded and renamed the already-existing Hope scholarship credit, can be claimed in tax-years 2009 through 2017 for expenses paid for tuition, certain fees and course materials for higher education.
This credit is a refundable tax credit for undergraduate college education expenses. Available only for 4 tax years per eligible student. You can claim the American Opportunity Credit for yourself or your dependents if you or your dependents are students enrolled at least half-time in a college, university or other accredited post-secondary educational institution.
The credit is limited to $2,500 on the first $4,000 of qualifying educational expenses. Phaseouts apply for the credit beginning with a modified adjusted gross income (AGI) over $80,000 ($160,000 for married couples filing jointly). A reduced amount of the credit is available if your AGI is over $90,000 (($180,000 for married jointly filers).
The amount of American Opportunity Tax Credit is:
- 100% of the first $2,000 in qualifying education expenses, plus
- 25% of the next $2,000 in qualifying expenses
For a maximum credit of $2,500 based on $4,000 in qualifying expenses.
Up to 40% of the American Opportunity credit is refundable. That means up to $1,000 of the American Opportunity credit can be refunded, even if your tax liability is zero.
Qualifying expenses are restricted to tuition and related course materials. So books, lab supplies, software and other class materials may qualify for the tax credit.
The credit is available for any post-secondary tuition, including graduate school or undergraduate education without a limit on years. The lifetime learning credit is available for any course and the student does not have to be enrolled at least half-time. It is a non-refundable credit.
The credit is limited just to tuition and fees required for enrolment or attendance, including amounts required to be paid to institutions for course-related books, supplies and equipment.
As with the American Opportunity Tax Credit, income restrictions apply to the Lifetime Learning Credit. To claim the full credit as a single filer, your modified adjusted gross income (MAGI) must be $65,000 or less, or $131,000 or less if you are married and filing jointly. If your MAGI is between $55,000 and $65,000 (between $112,000 but less than $131,000 for married filing jointly), you receive a reduced amount of the credit. If your MAGI is over $65,000 ($130,000 for joint filers), you cannot claim the credit.
The maximum credit is up to $2,000 per return.
The kiddie tax applies to your child's unearned income when it exceeds $2,100. The first $1,050 reported on your return is tax free, the second $1,050 is taxed at the child's rate. Unearned income above that amount is subject to the Kiddie Tax, that is your marginal tax rate, which is the highest rate applied on your return. That could be as high as 28% to 39.6%.
Unearned income can be investments, such as interest, dividends and capital gains. Income of wages or self-employment are not included.
Your child is generally affected with an unearned income of more than $2,100 if he or she is:
- under the age of 18 at the end of 2017, with earned income from working, that is less than or equal to half their support
- full-time student age 19 and under 24 at the end of 2017, with earned income from working, that is less than or equal to half their support.
- at least one of the parents was alive at the end of 2017
- the child does not file a joint return for 2017
Read more on:
- 2017 taxes: IRS, or read further at Forbes
- Earned Income Tax Credit at IRS, Tax Foundation
- Personal Exemption Phaseout at Tax Policy Center, Thebalance.com
- Alternative Minimum Tax at Savingtoinvest.com
- Child Tax Credit at Efile.com
- Tuition credits at IRS
Go to Federal Income Tax 2016
UPDATED: Feb 22, 2017