New 2017 Tax Laws
As this is the time of year that individuals and families are filing their 2016 taxes, there are a variety of changes and tax adjustments that are important to note as people are doing their taxes this spring. There are four new tax laws that are important to know before doing one’s taxes.
The Protecting Americans From Tax Hikes Act (PATH) restricts the IRS from sending out credits or refunds on any tax returns that claim the Earned Income Tax Credit(EIC) or Additional Child Tax Credit (ACTC) until after February 15th. The PATH act made the EIC and ACTC, longtime “temporary” tax credits that had to be repeatedly renewed, permanent tax credits. The act delays the payment of returns so that the IRS may cross reference tax forms from employers against an individual’s tax return to lower the chances of fraud. Currently 21% of EIC claims contain errors or are fraudulent, and this act aims to significantly decrease that number. Unfortunately this means that people that were counting on an early tax return to help with bills will have to wait until the end of February to receive those funds.
There is also an increase in limits for tax deferred Medical Savings Accounts(MSA’s). The deductible limit for an individual as well as limit and minimum’s for family coverage have all increased. Not everyone is receiving these increases, as anyone with healthcare coverage purchased from Healthcare.gov will not be able to find a compatible health plan.
Deductions for medical expenses are ending for most senior citizens as well. In order to claim a deduction for medical expenses, the seniors medical expenses must be greater than 10% of the seniors adjusted gross income. There had been an exception to this rule that decreased the percentage to 7.5%, but that adjustment ended in 2016. In order to reach that 10%, seniors can include costs of public transportation, tolls, parking fees or ambulance rides in their medical expenses.
There have not been significant changes to threshold adjustments this year as inflation was relatively low. The standard deduction for married couples filing jointly increases by $100. For separate filers, the deduction is only increasing by $50. The maximum for the Earned Income Tax Credit for three or more children has increased to $6,318. The rate of inflation is slowly but consistently rising for the last two years and these adjustments may fluctuate more drastically in coming years.
For business law and tax law help, contact John McDuff.