The inauguration of the new president in 2017 may greatly impact the way that Americans file their returns this upcoming tax season. The manner in which taxes were prepared and paid may no longer be the standard on which taxpayers can rely. Get ready for the 2017 tax season by discovering what changes may be lying in wait for you and your return.
Delayed Tax Refunds
Every year it seems rumors fly about the IRS holding people's tax refunds. This next year, however, those rumors come true because of the IRS' plans to hold the refunds of people who claimed the Earned Income Tax Credit or the additional child tax credit.These refunds will be held in an effort to combat fraud and identity theft. Both problems have plagued the IRS and millions of people's returns and refunds in recent years. To verify people's returns and to ensure that refunds stay out of the hands of thieves, the IRS plans to hold EITC and additional child tax refunds until February 15.
You can prevent your refund from being held by taking action now, however. Change your withholding amount on your W-2 before the end of 2016. You get to keep more of the money in your paycheck, and you will still get your refund, albeit a lesser amount, before February 15.
Raised Standard Deduction Limits
Another tax filing change that may occur in 2017 involves the amount that you can claim for standard deductions. The new president's proposal would raise the standard deduction limit for single filers from $6300 to $15,000.Likewise, the standard deduction amount for couples filing jointly would be raised from $12,600 to $30,000. Further, personal exemptions for couples filing jointly could be eliminated entirely.
You may offset these raises in deduction limits by rethinking the manner in which you intend to file your return. You may consider filing separately from your spouse or filing as Head of Household if it would lower your tax burden.
Itemized Deduction Caps
The president-elect's new tax plan also would put a cap on itemized deductions. His proposal would cap the itemized deductions of single filers at $200,000 while couples filing jointly would be capped at $200,000 for itemized deductions.Further, the plan also would eliminate the 3.8 percent tax on net investment incomes of single filers who have modified AGIs of $200,000 or more. The modified AGI for couples filing jointly would be $250,000 or greater under the new plan. Finally, the president-elect's also proposes getting rid of the alternative minimum tax and estate tax.
Retirement Saving Changes
The 2017 tax year could allow low and moderate income earners to put more toward retirement without facing tax penalties. Retirement saving changes that you may anticipate for the upcoming tax season include:- Earning $250 more in 2017 while still being eligible for the saver's credit
- The saver's credit being worth 10 to 50 percent of your savings if you are single and earn less than $31,000
- Claiming the same saver's credit percentage if you are married and earn $62,000 or less
- Contributing up to $2000 to your IRA if you are single or $4000 if you are married filing jointly
These changes are designed to let you save more for retirement and receive a higher credit without being penalized because of your income or contributions.
Higher Gifting Limits
The 2017 tax season may also allow you to give higher value gifts without having to claim them on your return. The new proposal suggests allowing single filers to give gifts totaling $14,000 while giving married couples the opportunity to give up to $28,000 combined in gifts.
If your gifts exceed those values, you will have to fill out and submit a Form 709 to the IRS. Likewise, the new proposal may allow you to receive gifts totaling $100,000 without having to claim them on your return. Gifts over $100,000 must be claimed by filling out and submitting an IRS Form 3520.
Much uncertainty remains about what to anticipate with the new president and his proposed tax filing changes. However, you can get ready now by learning more about what changes are under discussion now before the 2017 tax season starts.
