Tips & Updates for 2017 Taxpayers

**Tips and Updates for 2017 Taxpayers**

Exemptions – The exemption amount for 2017 has been eliminated.

Unreimbursed Medical Expenses – In 2017 the Adjusted Gross Income (AGI) starting point after which you can claim unreimbursed medical and dental expenses to 7.5% of your AGI.  There is an exemption till 2016 for individuals age 65 and older and their spouses, allowing them to continue using the 7.5% AGI limits.

Standard Deductions – The standard deduction amounts have increased marginally for 2017 to $24,000 for single, or married filing separately, $18,000 for married filing jointly or qualifying widow(er), and $12,000 for head of households.

IRAs – $5,500, no change from 2013, may be contributed to a traditional or Roth IRA in 2015.  Those 50 or older at year-end can make an additional catch-up contribution of $1,000.  Contributions to traditional IRAs may be deductible, depending on several factors and are phased out at higher AGI levels.  Distributions continue to be fully taxable as ordinary income, unless there were historical nondeductible contributions.

Employer-Sponsored 401(k) Pretax contributions to traditional 401(k) reduce taxable wages, additionally matching contributions and earned income within your plan are tax-deferred until distributed.  The employee contribution limit for 2014 is $17,500.  Employees age 50 or older by year-end may make an additional catch-up contribution of $5,500.  Distributions continue to be fully taxable as ordinary income.

Roth 401(k) – Contributions are made with after tax funds, while the earning are tax-deferred.  Taxpayers are allowed to roll over certain traditional IRAs and 401k’s into a Roth, but the pretax contributions are taxable for this transaction.

You should consult with your CPA, to better understand the rules related to retirement account distributions if you are about to retire.

**Child & Education Tax Considerations**

Child Tax Credit – $1000 tax credit for each qualifying dependent, under the age of 17 at 12/31.

Child & Dependent Care Credit – When both parents work, have earned income, and engage in hired childcare inside or outside of the home, dependents under the age 13 are eligible for a tax credit between 20% to 35% of qualifying expenses, based on income level.  For 2014, the maximum amount of qualifying expenses on which the credit can be claimed is the lesser of the amount of qualifying expenditures, $3,000 for the care of one dependent or $6,000 for at least two qualifying children, or the taxpayer’s earned income.

Higher Education Tax Credits – A tax credit of up to $2,500 per student for qualifying expenditures is available for the first four years of college.  Or a Lifetime Learning Credit of 20% up to $10,000 if eligible expenses per year is available for undergraduate, graduate, and professional degree courses.  However, both credits phase out for higher income individuals, and you cannot claim both credits for the same student in the same tax year.

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