With a New Year, come changes in the tax law. Listed below are a few items that we would like to make you aware of for 2017. Please read each item carefully and let us know if you have any questions.
Social Security/Medicare Tax Limits and Rates
For 2017, the wage base for the social security tax rises to $127,200. The Medicare rate remains at 1.45% with no ceiling.
Additional Medicare Tax
The additional Medicare Tax of .9% still applies to individuals’ wages, other compensation and self-employment income over certain thresholds. Employers are responsible for withholding the additional tax on wages and other compensation that exceed $200,000 in a calendar year, but there is no employer match for the additional Medicare Tax. An employer is required to begin withholding the Additional Medicare Tax in the pay period in which it pays wages in excess of $200,000 to an employee.
Payroll Tax Deposit Rules
The Internal Revenue Service makes a determination each year whether the employer is a semi-weekly or monthly depositor. You will be receiving notification from the Internal Revenue Service if your status has changed.
For distributions made in 2016 that include federal withholding, Form 945 is required to be filed by January 31, 2017.
The amount you are able to contribute to 401(K) plans remains at $18,000 for 2017. The amount of “catch up” contributions for individuals who are 50 and above also remains unchanged at $6,000 for 2017.
For defined contribution plans, the 2017 limit has increased from $53,000 to $54,000.
Lastly, the maximum contribution to an IRA remains $5,500 for 2017. Individuals who are 50 or older may still make an additional “catch up” contribution of $1,000 for 2017. The last day to contribute to an IRA for the 2016 tax year is April 18, 2017.
Mileage Reimbursement Rate
The mileage reimbursement rate for business miles dropped from $0.54 per mile in 2016 to only $0.535 per mile in 2017.
Section 179 Expense and Bonus Depreciation
For 2016, up to $500,000 of qualifying purchases could be expensed under Section 179. Further, the amount of the deduction is reduced dollar-for-dollar for amounts spent on qualifying purchases in excess of $2,010,000 (the “investment ceiling”). For 2017, the overall deduction limit remains at $500,000, but the investment ceiling is raised to $2,030,000.
In addition, bonus depreciation of 50% of the value of qualifying property purchases may be taken for both 2016 and 2017. “Qualified property” for bonus depreciation still includes all new tangible property depreciated for less than 20 years, but was expanded by congress to now include certain nonresidential real property improvements.
You may receive notification from your state of changes going into effect for 2017 related to state taxes/filings, e-verify, minimum wage, etc. These changes could be related to sales tax, unemployment tax, tangible taxes, etc. If you receive a notice or have questions related to a specific state, please contact us.
New Administration Expected to Make Large Changes
The new Trump administration is expected to work quickly with Congress on making major revisions to current tax law. Per President-elect Trump’s proposed plan, this may include different tax brackets and rates, lower capital gains rates, and a repeal of the additional 3.8% tax on net investment income. We will keep you updated on any changes.
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If you have any questions concerning the above, please do not hesitate to contact our office.
Certified Public Accountants