2017 U.S. Tax Rate Structure and Adjustments
Explore the 2017 U.S. tax brackets, including income thresholds, rate adjustments for inflation, deductions, credits, and provisions like AMT and PEP. Understand how these factors impact your tax planning and overall liability.
Understanding 2017 Tax Brackets in the United States
Taxable income encompasses earnings from employment, rental properties, awards, investments, gambling, and business ventures. It excludes funds like educational grants, gifts, inheritances, accident settlements, and worker compensation.
In 2017, tax brackets are divided into seven levels, each taxed at varying rates. The IRS adjusts these brackets annually for inflation across over 40 tax provisions, a phenomenon known as "bracket creep." This adjustment can push taxpayers into higher tax brackets or reduce deductions and credits without a real income increase.
Determining 2017 Tax Brackets
The IRS bases tax law adjustments on the Consumer Price Index (CPI), measuring inflation and living costs. CPI increases can lower your tax burden if your income remains unchanged, as tax thresholds and deductions shift accordingly.
Overview of 2017 Tax Brackets
Income limits for all brackets are inflation-adjusted. The highest marginal tax rate is 39.6%, affecting single filers earning $418,400 or more, and married couples earning $470,700 or more.
Standard Deduction
For 2017, the standard deduction rises by $50 for singles and $100 for married filing jointly. The personal exemption stays at $4,050.
PEP and Pease Provisions
These provisions raise taxable income for high earners through phase-outs of personal exemptions and itemized deductions. The income thresholds increase to $261,500 for singles and $318,800 for joint filers. The phase-outs end at higher income levels ($384,000 for singles, $436,300 for couples).
Alternative Minimum Tax (AMT)
Created to ensure high-income taxpayers pay minimum tax, AMT involves calculating taxes twice, with the higher due. It uses Alternative Minimum Taxable Income (AMTI) and features exemptions of $54,300 for singles and $84,500 for married couples. The 28% AMT rate applies to AMTI exceeding $187,800.
In 2017, exemptions phase out starting at specific income thresholds ($120,700 for singles, $160,900 for couples).
Tax Credits
The Earned Income Tax Credit offers up to $510 for filers without children, with higher credits for those with children ($3,400 to $6,318). These credits see slight adjustments from 2016.
Key Takeaways
Tax brackets are applied progressively; income is taxed incrementally across brackets.
Tax brackets relate to taxable income, not gross earnings.
Household Tax Strategies
Taxpayers often reduce taxable income through pre-tax contributions to retirement or savings accounts like 401(k)s, IRAs, or flexible spending accounts.
Exemptions and Deductions
Most taxpayers claim a $4,050 personal exemption. Standard deductions for 2017 are $12,700 for married filing jointly, $9,350 for heads of household, and $6,350 for others. Itemized deductions are available for those with significant expenses, such as investments or medical costs.
The estate tax exemption increases slightly to $5.49 million, with gift exclusions around $14,000.
Tax laws evolve annually based on CPI and income relationships, making it essential to consider future bracket shifts.
