Tax season is right upon us, and that means you need to know what has changed during the 2016 tax year, and what to anticipate for the 2017 tax year and beyond.
With Donald Trump as the new president in the White House promising major tax changes, the question becomes: What are the changes he has promised, and how would they affect your 2016 filing, if at all?
The short answer is that they won’t. That’s because the changes he is proposing to cut corporate and estate taxes and revise individual income tax brackets won’t happen that swiftly, and his promise to repeal and replace The Affordable Healthcare Act is complicated and will require a significant set of policy changes.
So what should you be concerned about this tax season that could affect the outcome of what you pay in taxes, and how you should plan for 2017? We will look at three major areas: Social Security, Healthcare, and the Educational Benefits.
Social Security
Social Security benefits will rise in 2017, but only by 0.3 %. This means that the maximum monthly benefit for a senior claiming at age 62 becomes $2,153, a $45 increase from 2016. In addition, Social Security’s full retirement age is slowly rising, moving 2 months this year. The new retirement age will move eventually from 66 years to 67 years in 2022. In short, there’s not much to watch in the area of Social Security, as the changes are minimal.
Healthcare
President Trump’s campaign promise to repeal and replace “Obamacare” is a much more complicated issue, and will likely take awhile to affect the average American’s access to affordable healthcare. Medicare and Medicaid will likely stay the same for the time being. Medicare premiums and deductibles have risen by a meager amount for 2017; the average premium and deductible by a few dollars. However, healthcare in general is a hot topic for the new administration, and we will be watching to see how it may affect your specific situation.
Educational Benefits
For 2016, there are some educational benefits that are expiring; specifically, the Tuition and Fees Deduction. This tax year is the last year that you can claim an above-the-line deduction as large as $4,000 for any qualifying tuition and fees you paid for yourself, your spouse, or a dependent. Even if those expenses were paid for with a student loan, the deduction could still be claimed. If you have these expenses, be sure to mention them to your tax consultant.
Looking Ahead
The time to look and plan ahead for the optimal tax outcome is always at least one year in advance, and ideally more. This blog post covered a brief overview of 2016 expiring breaks and potential 2017 changes that could impact your taxes in Social Security, Healthcare and Educational Benefits. It is wise to have your financial advisor stay on top of potential changes in these areas that could impact your taxes. For more information on 2016 tax preparation in general or looking ahead to 2017 and beyond, contact a Richard Brothers financial professional at 207-879-2352 today.
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