Saturday, December 31, 2016

2017 Income Tax Rates

It's the last day of the year.  Join me in ushering in the new year by comparing the 2016 and 2017 income tax rates.  Yoohoo!  Well, pardon me.  I'll be looking only at the ones for married tax payers filing jointly because we belong in that category.  You should be able to easily find the ones for yours.

2016 Income Tax Rates for Married Filing Jointly


Taxable Income Range
Tax Amount
$0 – $18,550

10% of entire amount
$18,550+ – $75,300

$1,855.00 + 15% of amount over $18,550
$75,300+ – $151,900

$10,367.50 + 25% of amount over $75,300
$151,900+ – $231,450

$29,517.50 + 28% of amount over $151,900
$231,450+ – $413,350

$51,791.50 + 33% of amount over $231,450
$413,350+ – $466,950
$111,818.50 + 35% of amount over $413,350

$466,950+
$130,578.50 + 39.6% of amount over $466,950


2017 Income Tax Rates for Married Filing Jointly


Taxable Income Range
Tax Amount
$0 – $18,650

10% of entire amount
$18,650+ – $75,900

$1,865.00 + 15% of amount over $18,650
$75,900+ – $153,100

$10,452.50 + 25% of amount over $75,900
$153,100+ – $233,350

$29,752.50 + 28% of amount over $153,100
$233,350+ – $416,700

$52,222.50 + 33% of amount over $233,350
$416,700+ – $470,700
$112,728.00 + 35% of amount over $416,700

$470,700+
$131,628.00 + 39.6% of amount over $470,700


A couple of observations:

  1. Rates for each bracket are the same.
  2. It's the upper limit for each bracket that changed.  They all increased by a little.  This means that more of our income will be taxed at lower rates.  This means lower taxes, but not much lower.  You will find below a sampling of income amounts and their calculated 2016 and 2017 taxes, assuming income stays the same and not accounting for any deductions.

Taxable Income
2016 Tax
2017 Tax
Difference (%)
$10,000
$1,000
$1,000
9 (0%)
$50,000
$6,572.50
$6,567.50
-$5.00 (-0.0761%)
$100,000
$16,542.50
$16,477.50
-$65.00 (-0.3929%)
$200,000
$42,985.50
$42,884.50
-$101.00 (-0.2350%)
$300,000
$74,413.50
$74,217.00
-$196.50 (-0.2641%)
$425,000
$115,896.00
$115,633.00
-$263.00 (-0.2269%)
$500,000
$143,666.30
$143,230.80
-$435.50 (-0.3031%)


Yep, I told you they weren't much lower.  But I'll take it.

On the flip side, more of our income will be taxed by Social Security.  The cap will go up a whopping 7.3% from $118,500 in 2016 to $127,200 in 2017. What does this mean? If you're earning $118,500 or less, this does not affect you. But if you are earning more than that, say goodbye to 6.2% more of the rest up to the new cap of $127,200.  Let's say your income in 2017 will be $130,000. The $8,700 difference between the old and new caps will now be taxed at 6.2%. That means you'll pocket $539.40 less for the year.  If you'll earn somewhere between $118,500 and $127,200, then the impact on you will be proportionally less.

I don't know how much impact this additional tax would have on your Social Security benefits when you start collecting them.  And that is assuming the system will still be alive by then.

Okay, how does this help your gut decide on anything?  It doesn't.  Taxes are a part of life. The more we earn, the more we're taxed, but it shouldn't dissuade you from working harder, I hope.

Happy New Year!  Keep trusting your informed gut.
Iggy

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