Each year, the IRS makes cost-of-living adjustments in accordance with increases in the cost of living — as measured by the Consumer Price Index (CPI). Because inflation typically remains in check, the increases are often small (if they occur at all). The charts below reflect the new tax brackets and exemption amounts for 2017.

Ordinary Income Tax Brackets

Tax bracket thresholds usually increase for all filing statuses. However, because the thresholds are based on percentages, the increase is more noticeable for those in higher brackets. For instance, in 2017, top of the 10% bracket increases by $50 to $100, depending on filing status, but the top of the 35% bracket increases by $1,875 to $3,750, again depending on filing status.

Tax RateSingleHead of HouseholdMarried Filing Jointly or Surviving SpouseMarried Filing Separately
10% $0 – $9,325$0 – $13,350$0 – $18,650$0 – $9,325
15%$9,326 – $37,950 $13,351 – $50,800 $18,651 – $75,900$9,326 – $37,950
25%$37,951 – $91,900 $50,801 – $131,200$75,901 – $153,100 $37,951 – $76,550
28%$91,901 – $191,650$131,201 – $212,500$153,101 – $233,350 $76,551 – $116,675
33%$191,651 – $416,700$212,501 – $416,700$233,351 – $416,700$116,676 – $208,350
35%$416,701 – $418,400$416,701 – $444,550$416,701 – $470,700$208,351 – $235,350
39.6%> $418,400> $444,550> $470,700> $235,350

AMT Brackets

The alternative minimum tax (AMT) is a separate tax system that limits some deductions, prohibits others, and applies different treatments to certain income items. Like regular income tax brackets, AMT tax brackets are adjusted for inflation.

 SingleHead of HouseholdMarried Filing Jointly or Surviving SpouseMarried Filing Separately
26%< $187,800< $187,800< $187,800< $93,900
28%> $187,800> $187,800> $187,800> $93,900

Child- and Education-Related Breaks*

Most of these breaks are limited based on the taxpayer’s filing status and modified adjusted gross income (MAGI). Taxpayers whose MAGIs are within the applicable phaseout range (i.e., the salary range for which tax benefits are reduced) are eligible for a partial break, which is not available for those whose MAGIs exceed the top of the range.

*Note: Married couples filing separately are typically ineligible for these breaks.

Adoption CreditAmerican Opportunity CreditLifetime Learning Credit
Maximum Credit Amount$13,570$2,500 per eligible student$2,000 per tax return
Phaseout Range for Joint Filers$203,540 – $243,540$160,000 – $180,000$112,000 – $132,000
Phaseout Range for Other Filers$203,540 – $243,540$80,000 – $90,000$56,0000 – $66,000

Retirement Plan Limits

The chart below lists the maximum allowable contribution amounts to a variety of retirement plans.

Type of LimitationPlan Limit
Annual Benefit for Defined Benefit Plans$215,000
Catch-Up Contributions to 401(k), 403(b), 457(b)(2) And 457(c)(1) Plans$6,000
Catch-up Contributions to IRAs$1,000
Catch-up Contributions to SIMPLEs$3,000
Compensation for Benefit Purposes for Qualified Plans and Simplified Employee Pension Plans (SEPs)$270,000
Contributions to Defined Contribution Plans$54,000
Contributions to IRAs$5,500
Contributions to Savings Incentive Match Plans for Employees of Small Employers (SIMPLEs)$12,500
Elective Deferrals to 401(k), 403(b), 457(b)(2) And 457(c)(1) Plans$18,000
Highly Compensated Employee Threshold$120,000
Minimum Compensation for SEP Coverage$600

IRA Eligibility

In general, a taxpayer’s MAGI may reduce or even eliminate his or her ability to take advantage of IRAs. Fortunately, all IRA-related phaseout ranges have increased for 2017.

Traditional IRAs

MAGI phaseout ranges apply to the deductibility of contributions if the taxpayer (or his or her spouse) participates in an employer-sponsored retirement plan. For married taxpayers filing jointly, the phaseout range is specific to each spouse based on whether s/he participates in an employer-sponsored plan.

Married Plan Participant(s) Filing JointlyMarried Non-Participants Filing JointlySingle or Head-of-Household Plan Participants
Phaseout Range$99,000 – $119,000$186,000 – $196,000$62,000 – $72,000

While taxpayers whose MAGIs are within the applicable range can deduct a partial contribution, those whose MAGIs exceeding the range cannot deduct any IRA contribution.

Roth IRAs

A taxpayer’s ability to contribute to a Roth IRA is not determined by his or her participation in an employer-sponsored plan. Rather, MAGI limits may reduce or eliminate a taxpayer’s ability to contribute. Only taxpayers whose MAGIs fall within the phaseout ranges can make partial contributions. Those whose MAGIs exceed the top of the range cannot contribute.

Married Taxpayers Filing JointlySingle or Head-of-Household Taxpayers
Phaseout Range $186,000 – $196,000$118,000 – $133,000

Gift and Estate Taxes

The chart below lists the amounts for exemptions from the following taxes:

  • The generation-skipping transfer (GST) tax applies to financial transfers to grandchildren and other distant descendants (i.e., transfers made by “skipping” a generation). The exemption amount is the total that a taxpayer can give away tax-free during his or her lifetime.
  • The gift tax applies to any property transferred by gift. The gift tax exclusion is the maximum amount a person can give to an unlimited number of individuals. For example, in 2017, a taxpayer can make $14,000 gifts to as many people as she desires.
  • The estate tax — which is included in the unified gift and estate tax exemption — applies to any property a taxpayer transfer after his or her death. The exemption amount is the total that a taxpayer can give away tax-free during his or her lifetime.
GST Tax ExemptionGift Tax ExclusionUnified Gift and Estate Tax Exemption
Amount Per Individual$5.49 million$14,000$5.49 million

Questions or Concerns? Contact CRI!

Please contact us if you have any questions regarding how the 2017 cost-of-living adjustments could affect your finances.