Additional 2017 Tax Inflation Adjustments

By Charles Webb, partner, and Laura Dadson, tax associate

The Internal Revenue Service recently released the annual inflation adjustments for tax rates, deductions and expenses for the 2017 tax year. Here are some additional updates, including the 2017 mileage rates and several available tax credits. These updates are effective Jan. 1, 2017 for all 2017 tax returns.

2017 Mileage Rates

The chart below shows the mileage rates taxpayers may use to determine deductible amounts when driving a vehicle for business, medical, moving or charitable purposes.

Mileage Type 2017 Rate per Mile
Business 53.3 cents
Medical 17 cents
Moving 17 cents
Charity 14 cents

 

2017 Hope Scholarship Credit (American Opportunity Tax Credit)

The Hope Scholarship Credit amount for 2017 will be 100 percent of the first $2,000 in qualified tuition expenses, plus an additional 25 percent of the next $2,000 in qualified tuition expenses. The maximum Hope Scholarship Credit is $2,500 per student.

Income limits:

  • To claim the full credit, the taxpayer’s modified adjusted gross income (MAGI) must be less than $80,000 (single) or $160,000 (married filing jointly).
  • The phase-out is between $80,000 and $90,000 MAGI (single) or $160,000 and $180,000 MAGI (married filing jointly).
  • If MAGI is over $90,000 (single) or $180,000 (married filing jointly), the credit cannot be claimed.

2017 Lifetime Learning Credit

The taxpayer may claim a maximum credit of $2,000. To claim the full credit, the taxpayer’s MAGI must be less than $56,000 (single) or $112,000 (married filing jointly).

2017 Child and Dependent Care Credit

One Individual may expense up to $3,000 for the care of a qualifying individual, while two or more individuals may expense up to $6,000 for the care of a qualifying individual.

2017 Student Loan Interest Deduction

The maximum amount a taxpayer may take as a deduction for interest paid on student loans is $2,500. Phase-outs apply when a taxpayer’s MAGI is over $65,000 (single) or $135,000 (married filing jointly). If the taxpayer’s MAGI is greater than $80,000 (single) or $165,000 (married filing jointly), the student loan interest deduction cannot be used.

2017 Kiddie Tax

A taxpayer’s child or the taxpayer is responsible for paying the Kiddie Tax when a child’s unearned income is greater than $1,050. If a child’s unearned income is below $1,050, then no federal income tax is applied.

2017 Elementary and Secondary School Teacher Expenses

Elementary and secondary school teachers may expense up to $250 of qualifying education expenses, such as books, supplies, computer equipment and other supplementary materials used by the eligible educator in the classroom.

Election to Expense Certain Depreciable Assets

The total cost of any Section 179 property that a taxpayer elects to treat as an expense may not exceed $510,000. The $510,000 limitation is reduced to zero by the cost of Section 179 property placed in service during the 2017 taxable year which exceeds $2,030,000.

Questions on these or other inflation adjustments? Contact Charles Webb at charles.webb@aprio.com.

Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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