The New 2017 Federal Income Tax Brackets and Deduction Limits (Updated September ’17)

I know it’s a little soon to be talking about filing your 2017 tax return (though, it’s never actually too early!), but a bit of news happened this week that could drastically change the amount of taxes you’ll pay next year.  Donald Trump recently released his plan to cut taxes for the upcoming filing year, and if his plan becomes legislation, it means a full overhaul of the current tax code.

trump tax2

It’s important to note that the below table is not official, and the information within it is only conjecture at this point because no law has been passed. It’s likely to take a bit of negotiating to get something done, so the final result may look different. But it’s still fun to look at now and see what’s potentially around the corner.

2017 Federal Income Tax Brackets (Single)

If Taxable Income Is ...The Tax Is ...
$0 - $37,95012% of the taxable income
$37,950 - $191,650$4,554 + 25% of the taxable income over $37,950
$191,650 +$42,979 + 35% of the taxable income over $191,650

2017 Federal Income Tax Brackets (Married)

If Taxable Income Is ...The Tax Is ...
$0 - $75,90012% of the taxable income
$75,900 - $233,350$9,108 + 25% of the taxable income over $75,900
$233,350 +$48,470.50 + 35% of the taxable income over $233,350

If you’re wondering where the rest of the table is… well, that’s it.  Three tax brackets, and tax rates of 12%, 25%, and 35%. Gone is the seven bracket system, and here you see a much more simplified setup, with the top rate being 4.6% lower than in previous years (39.6% was the top rate in 2017).

New 2017 Standard Deduction

Another big benefit from the newly introduced Trump tax code is the increase of the standard deduction. Your proposed 2017 standard deduction amounts are as follows:

  • Married filing jointly and surviving spouses: $24,000 (previously $12,700)
  • Single, or married filing separately: $12,000 (previously $6,350)

But with all of these tax decreases, there is one glaring negative. The administration is looking to kill off all but two tax deductions that can be claimed on your tax return: the home mortgage interest deduction and charitable donations. Say goodbye to claiming a home office, travel expenses for a new job, state income tax, etc. Part of the hurt from this change will be relieved by the higher standard deduction amount, but for filers who love to add line after line of deduction? Well, those days may be over.

Related: The “Old” 2017 Standard Deduction and Exemption Limits

Please remember that these rates are for the income you receive in 2017 and the tax return you will be filing in early 2018. Of course, nothing is official until the IRS confirms what the tax rates will be. This likely won’t happen for a good long while, so we will continue to monitor the situation.

RelatedFile your tax return for free with Credit Karma!

UPDATE – September 27th, 2017

Five months ago, Gary Cohn and Steve Mnuchin provided a peek at what the new administration was looking for in a tax reform plan.  Today, Donald Trump stepped up to the podium and provided a few additional details.  Somewhat striking is that the only noticeable “change” from the initial reveal is that the lowest income tax bracket went from a 10% tax to a 12% tax.  All other frame-work remained the same.

Here are a few new details that Trump provided today with regard to your potential 2017 Federal Income Tax Brackets:

  1. The Child Care Tax Credit will be going up from $1,000. (No news as to just how high)
  2. An additional $500 Tax Credit for non-child dependents has been added (for the elderly, for example)
  3. There is a high likelihood that a 4th tax bracket (above 35%) will appear for the wealthy.  No specific details were provided
  4. Confirmed removal of the state and local tax deductions
  5. Keeping the mortgage interest deduction and charitable deductions
  6. Elimination of the estate (death) tax
  7. A one-time repatriation tax of an unspecified amount.  This is an attempt to bring money kept overseas back to the United States
  8. A corporate tax rate of 20%

As a reminder, this is not a finished product.  If tax reform is signed into law AND reverted back to 2017 it will likely be different than the numbers you see above.  How different is unknown but we’ll continue to publish updates as they’re presented.

Topics: Taxes

24 Responses to “The New 2017 Federal Income Tax Brackets and Deduction Limits (Updated September ’17)”

  1. Jamie Smith

    Simplified sounds better. I’d be curious to see how this affects my 2017 return. Perhaps I will calculate using the current rules and then recalculate with the new ones, if implemented! I sure hope we wouldn’t get dinged for underpayments if the new way would increase our taxes due.

    • Stephanie Colestock
      Stephanie Colestock

      Luckily, the proposed changes *should* result in lowered income taxes for everyone across the board. The only way you’d have to worry about getting dinged for more is if you adjusted your witholdings to account for certain deductions (high, predictable medical expenses, for instance) that will now be potentially eliminated. Since the vast majority of people DON’T do this, I would venture to say that you’ll be in the clear (as the proposal stands today).

    • William

      Simpler *sounds* better, but does going from 7 to 3 brackets really simplify anything? And is it really better? I don’t think anyone actually looks at the brackets to figure out what to pay in taxes. Either they look in a table provided by the IRS or, for most, the computer just tells you what it is. 3, 7, there could 100 brackets and it wouldn’t make things any more simple or complicated, except for the programmers working at Turbo Tax.

      Getting rid of deductions will make things simpler but that doesn’t mean it will help you. I just purchased a house last year. Without any other deductions to add to my mortgage interest deduction (MID), I may end up taking the standard deduction which means buying the house really didn’t do anything for me. I wouldn’t complain but MID was a factor in me buying the house and if I would have known that it was going away, I might have done things differently.

      Reality is, if this plan is implemented, they should kill off the MID entirely… leaving it will only do any good for those with a $500K-1M mortgage. Unless you live in CA or NY, these are not the people that need the deduction. (While I do take advantage of it, I’ve always thought they should get rid of the MID. It’s a farce. It doesn’t help lower income people at all. It should be based on the market where you live….. and there should be no deduction for 2nd homes. It’s ridiculous if you look at it. If they want to encourage lower income people to buy, the MID should capped at some number like a $300K mortgage (actually should be based on your market) and it should be deductible outside of the standard deduction like student loan interest. But this is a whole ‘nother argument)

      What I haven’t heard anything about is the personal exemptions. I have a wife and 2 kids so that helps me quite a bit. If Trump gets rid of those under the guise of simplifying tax code by raising the standard deduction (which, as mentioned, will negate my ability to itemize), well, the bottom line is I’m going to have higher taxable income because instead of itemizing + personal exemptions, I will just have the standard exemption which will be less.

      If he gives more in the area of child-care deductions, that could make up for it. But right now, my wife stays home. If you have to have a working spouse and must be paying someone else to watch your kids — as it is today –, that isn’t going to give me any boost.

      At the end of the day, I don’t think taxes will change for most middle and lower class folks. I think this plan is really just a shell game of moving numbers around to mesmerize while giving a big tax break to the wealthiest people. And if the govt. doesn’t cut spending, we will just go into deeper national debt.

  2. Bill Stanton

    If those are the new tax tables then they will hurt my “very middle class” family of four. I personally voted for Trump but this will hurt my family. I like a lot of what he has done but it appears that the liberals were partially correct. He’s decreasing taxes on businesses and the high income earners but raising them on the middle class.

  3. While this is good PR for the President, it is not a realistic alternative to put before a Congress that is constantly looking for ways to increase tax revenue (from the people they begged campaign contributions from just months ago) and lower “entitlements,” in order to reduce a national debt that has been caused by prior government mismanagement. In the end, the Republican-controlled Congress and Executive office will stagnate, much like the Democratic version of the recent past, and, at best, nothing will be accomplished for the good of the middle-income American tax payer. Call it a conspiracy theory, but I think the people that hold office in Washington are representatives of a few powerful people, disguising themselves as public servants. The American working class, Soldiers, Veterans, working Mothers, and people wondering how anyone can afford to go to college these days, are just bovine fools who will do what we are told. As boisterous and loud-mouthed of a loose-cannon Donald Trump is, the “political machine” in Washington will nullify him and quell any thought of him ever making America great again, at their expense. Sad, but true. In the future the American people will have to reclaim this Country, or expatriate to a “New World.” Maybe New Zealand? Panama?

  4. Let me see how if I have this right…

    Filing married
    Combined income is 150k
    Subtract 24000
    Subtract 22000 (pretax investment)
    Subtotal 104k

    Subtract 75k
    Subtotal 29k

    29k (0.25) = 7250

    7250 + 7500 = approx. 15k
    This is my tax burden?
    15k / 150k = 10%

    Is this correct?

    • Michael Pruser
      Michael Pruser

      Correct. If you have a mortgage or charitable donations, you can write down the income even further but your effective federal income tax rate would be 10% in the above scenario.

      • This doesn’t make much sense. If I am taking the 24k st deduction, how can I also take the mortgage and charitable deduction as well without itemizing? If I itemize, I lose the standard deduction?

        • Michael Pruser
          Michael Pruser

          I understand what you’re saying but the term “itemizing” is no longer applicable in this plan. Standard + Mortgage + Charitable deductions. Gone would be the section of your tax return to list your deductions, as only three would be applicable going forward.

          • Ah, so you’re saying we would get the increased standard deduction, plus the mortgage interest + charitable deductions? That would be very good for us! I do think medical should still be on that list too, though we don’t usually have quite enough to use that deduction as it stands; medical is still a huge burden for a lot of middle class people.

  5. Kenneth

    Yes, pretty much everyones taxes would be lower under this arrangement. Corporations would also pay much lower taxes at the proposed 15 percent rate. There’s one huge problem with this – this will greatly increase the rate at which we are going into national debt. The debt clock is almost $20 trillion dollars today. The U.S. has to pay about $260 billion dollars a year in interest on the national debt presently. If our rate of debt increase soars, it’s likely the interest rates will also soar, as confidence in the dollar will erode quickly. At 6 percent, we would have to pay $1.2 trillion a year just in interest on the national debt.
    Cutting expenses is very difficult. The big three items are medicare/medicaid at 1.15 trillion a year, social security at 930 billion a year, and defense/war at 586 billion a year. The only one that makes sense to cut, in half, is defense/war but no one talks about that. Social Security was paid for by all workers and is a promise to pay it back. Medicare/Medicaid – the only solution that makes sense is to adopt a single payer national health care system similar to Canada and European countries, who spend a lot less on health care per capita than does the United States. But no one talks about THAT (Republicans hate it). That could be funded by increasing the 1.45 percent medicare/medicaid rate paid by both employees and employers to something like 6 percent each. At least we would all save money – no out of pocket medical expenses except elective plastic surgeries etc.

    • Michael Pruser
      Michael Pruser

      The deductions the Trump tax code would remove are only “itemized deductions”. Examples are state income tax, gambling losses, moving expenses, property taxes, etc. Here is a list of all the itemized deductions the IRS allows for (from the previous tax year)

      To answer your question, dependent care, writing down self employment taxes, child care tax credits … these are all things that would be unchanged. So taking care of a disabled family member or special needs person would carry the same tax benefits received in previous years.

      • To claim credit for child and dependent care expenses the following tests must be met:
        — Qualifying person test – Yes, I hire household employees to care for an adult disabled child and supply more than half of his support.
        — Work related expense test – No, my wife and I are retired, elderly, and ourselves disabled.
        — Earned income test – No earned income: I am using my 401-k retirement money (taxable) to pay his caregivers.
        I can no longer use Itemized Medical Expenses to offset the taxable 401-k withdraws despite the fact that I am saving the government (Medicaid) from paying for nursing home care, at least until my retirement money runs out. Anyone think this is fair?

    • Michael Pruser
      Michael Pruser

      When Trump campaigned on the tax reform platform, he did make mention of removing personal exemptions from the tax code. However, exemptions and dependents were not specifically mentioned on the information provided by the White House. In this plan, they would go unchanged from the 2016 tax year.

      Something to keep an eye on during negotiations.

  6. Linda Sue

    Based on the new regulations, I applied it to my 2016 return. Looks like it will cost me an additional $4,000.00. So much for a break for the middle class.

  7. Wait a second…. we won’t be able to deduct State, Local, and RE taxes? So we’ll be paying taxes on the taxes we already pay? Isn’t that double taxation? How would that not be challenged? Hopefully the dems are right and this will be “dead on arrival.”

  8. Pauline E

    I think the medical expense deductions should remain well over mortgage interest – these are expenses people had to pay over and above the medical insurance tax imposed by law. A lot of people are paying high deductibles and raised out of pocket expenses now – this current deduction is certainly more critical than a charitable donation exemtion!

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