New earnings test. The “earnings test” for Social Security benefits is edging up. For people attaining normal retirement age (NRA) after 2017, the threshold is $16,920 (up from $15,720). They lose $1 of benefits for every $2 of earnings above the limit. For those attaining NRA in 2017, the threshold is $44,880 (up from $41,880). They lose $1 of benefits for every $3 over the limit.
Bump in benefits. At least Social Security benefits for retirees are also increasing, albeit only slightly. For 2017, the average monthly benefit for all retired workers will go from $1,355 to $1,360; from $2,639 to $2,687 for those who’ve reached NRA.
Murder, he wrote. A CPA paid millions to investigators to help him find out if his father was murdered or committed suicide. The CPA hoped the results could lead to a book or movie deal. However, after he deducted the expenses on his tax return, the Tax Court characterized the activity as a hobby. (Vest, TC Memo 2016-187, 10/6/16)
Fast tax relief. If you incur a casualty loss in a federally designated disaster area, you can elect to claim the loss in the preceding tax year, instead of the year of the disaster. Now the IRS is extending this relief. It says you have six months after the tax return due date for the year of the disaster to make the election. (IRS Revenue Procedure 2016-53)
SSA hikes tax in ‘17. The Social Security Administration (SSA) has announced that the wage base for Social Security tax purposes is going up in 2017 … by a lot. It is increasing from $118,500 in 2016 to $127,200, a jump of $8,700 (SSA Fact Sheet, 10-18-16). In comparison, there was no increase in the wage base from 2015 to 2016. Changes in the wage base are predicated by adjustments in the Consumer Price Index. At least the tax rates forwill remain the same in 2017: 6.2% on wages up to the wage base and 1.45% on all wages. The rates for self-employed taxpayers are doubled, but these individuals can deduct half of the self-employment tax they must pay.
New plan limits on tap: The IRS has announced new inflation-based thresholds for qualified retirement plans in 2017. (IRS Notice 2016-162, 10/27/16)
- The elective deferral limit for participants in 401(k), 403(b) and most 457 plans remains at $18,000; and the catch-up contribution limit for those age 50 or older remains $6,000.
- The limit for additions to defined contribution plans increases to $54,000 (up from $53,000).
- The limit for contributions to a SIMPLE remains at $12,500, and the limit for catch-up contributions remains at $3,000.
- The maximum compensation amount taken into account for qualified retirement plans increases to $270,000 (up from $265,000).
Note: Certain other limits, including contribution limits for IRAs, remain the same. But phase-out ranges for traditional and Roth IRAs are adjusted upward slightly.
- Small Business Tax Deduction Strategies No matches