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New Tax Laws 2017
Change is the word for 2017 in many respects. While the incoming Trump administration promises many changes related to taxes, there are already changes written into law that will affect your
returns for the 2017 tax year (returns that you file in April 2018), and a few others affecting your 2016 taxes that take effect in 2017. Here are several of the changes to consider:
- Tax Credit Timing – The Protecting Americans from Tax Hikes (PATH) Act of 2015 established that the IRS cannot send out credits or refunds for overpayments until February 15 whenever the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) is claimed on the return. This provision takes effect on January 1, 2017. It doesn't
affect your 2016 return amount, but it could negatively affect your cash flow if you were counting on a relatively early return to pay bills.
- Healthcare Coverage – Limits are increasing for tax-deferred Medical Savings Accounts (MSAs) for the self-employed. The maximum deductible amount for out-of-pocket expenses for
self-only coverage ($4,500), the deductible limit on a plan with family coverage ($6,750), and the minimum deductible amount for annual family coverage ($4,500) have all increased by $50. The limit
on out-of-pocket medical expenses under family coverage ($8,250) increases by $100.
What about the Affordable Care Act (aka Obamacare)? The President-Elect has vowed to repeal it and he may have
sufficient support in Congress to do so, but for now, the ACA remains the law. People who avoided signing up for health insurance in anticipation of changes are still subject to the lack-of-coverage
penalty. The penalty for the 2016 tax year increased to either 2.5% of household AGI or a maximum of $2,085 ($695 per adult, $347.50 per child). For the 2017 tax year, the percentage stays the same,
but the per-person fee will be inflation-adjusted.
- Deductions for Senior Medical Expenses – One potential tax advantage in medical expenses for seniors is going away in 2017. In order to claim a deduction for medical expenses
when itemizing, your qualified medical expenses must be greater than 10% of
your adjusted gross income (AGI). An exception to this rule allowed seniors to deduct medical expenses over 7.5% of income, but that exception ends after the 2016 tax year.
Please schedule an appointment to learn more about important changes in tax law.