Beware These 5 Important Tax Changes for 2017
The U.S. tax code is constantly evolving. This means that each new year brings a slew of changes that taxpayers need to remember when filing their taxes.
What changes to the tax code took place last year, and how will they impact your federal taxes this year? Tax and financial experts say that the 2016 changes were relatively minor. But that doesn't mean that they won't have an impact on the amount of tax dollars you send to Uncle Sam this year.
Here is a look at five of the most important tax changes from last year, and what they'll mean to you as you file your taxes this April.
1. Standard deductions
The standard deduction for heads of households rose to $9,300 for the 2016 tax year, which was $50 more than in 2015. This amount was raised again for the 2017 tax year (which you'll pay in '18), bringing it up to $9,350.
Other standard deductions remained the same for the 2016 tax year: $6,300 for singles and married taxpayers filing separate returns and $12,600 for married couples filing jointly. For the 2017 tax year, both these numbers will increase again to $6,350 and $12,700, respectively.
2. Extra scrutiny for Earned Income Tax Credit, Additional Child Tax Credit
Dave Du Val, chief advocacy officer at TaxAudit.com, said that the returns of those taxpayers who claim the Earned Income Tax Credit or the Additional Child Tax Credit might receive more scrutiny in 2017. According to new federal law, tax preparers are required to complete several steps — or due diligence — when working with the returns of taxpayers who claim both of these credits.
The Earned Income Tax Credit is a refundable tax credit for working taxpayers with low to moderate incomes, and is designed to provide these filers some financial relief at tax time. The Additional Child Tax Credit is also designed for filers earning low incomes. These filers might receive a tax credit under this provision if their original child tax credit is more than the total amount of income taxes they owe.
Congress doesn't want filers to abuse these credits, Du Val said.
"What this means is that taxpayers who claim these credits inappropriately can lose the ability to claim them for years," Du Val said. "Also, those who use a professional tax preparer who follows the letter of the law might find themselves required to answer more questions and provide more documentation than they are generally used to."
3. You might need a driver's license to file electronically
Michael Eckstein, a tax accountant and owner of Michael Eckstein Tax Services in Huntington, New York, said that several states are now requesting or even requiring that taxpayers provide their driver's license information if they want to file their state tax returns electronically.
"Tax return fraud has been a growing problem," Eckstein said.
States are requesting the driver's license information as one way to cut down on tax-related identity theft.
Most states are only requesting that taxpayers who electronically file provide either their driver's license number or state ID numbers. You'll still be able to submit your state tax returns electronically without providing this information, but doing so might trigger a manual review by your state to verify your identity. This means it make take longer to receive a refund if you don't provide your driver's license or state ID number.
You won't be asked to provide this information, though, when filing your federal tax returns electronically.
4. Mileage deduction rate dips
Do you use your car for business? Then you know you can deduct those miles on your taxes. Unfortunately, that deduction has decreased. For the 2016 tax year, you can deduct 54 cents per mile that you drive your vehicle for business. That is down from 57.5 cents a mile in 2015. For the 2017 tax year, the deduction will decrease again to 53.5 cents per mile.
Be careful when deducting miles, though. You can't deduct the costs of your regular commute to and from work.
5. Three extra days to file
And maybe the most important change for the procrastinators out there? This year, you have a few extra days to file your taxes.
Sure, April 15 is the traditional day in which we're all supposed to file our taxes. But this year, filing day has been pushed back to April 18. Credit this bit of relief to the combination of a weekend and a Washington, D.C. holiday.
The usual April 15 deadline falls on a Saturday this year. Normally, taxpayers would have to file their income taxes on the following Monday, which would be April 17. But the D.C. holiday Emancipation Day is held on Monday, April 17. That gives taxpayers across the country one more extra day to file, April 18.
Federal law states that Washington, D.C. holidays impact tax deadlines the same way federal holidays do.
Disclaimer: The links and mentions on this site may be affiliate links. But they do not affect the actual opinions and recommendations of the authors.
Wise Bread is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.