High Income Taxpayers for Tax Year 2017

A Tax Increase on the Highest Incomes. For tax year 2017, the 39.6 percent tax rate affects single taxpayers whose income exceeds $418,400 ($470,700 for married taxpayers filing jointly), up from $415,050 and $466,950, respectively.

Additional Medicare Tax of 0.9% on Wages over $200,000 (single) or $250,000 (joint). This is tricky because employers will withhold this additional tax based on each taxpayer’s wages; therefore, joint filers might not have it withheld, but it will be due with your return.

Social Security and Medicare Taxes for all Wage Earners including those Self-Employed. Employees’ portion of the Social Security payroll tax will be 6.2% on income up to $127,200.

Taxpayers who have Net Investment Income Face a 3.8% Surtax on Categories of Certain Unearned Income to the extent certain threshold amounts of income exceed $200,000 (single) or $250,000 (joint).

Higher Capital Gains Rates for Top Earners. The top earners who are subject to the new 39.6% top rate on income now face a 20% rate on capital gains and dividends, up from 15%.

  • Taxpayers in the 10% and 15% income brackets have a zero capital gains rate
  • Taxpayers in the middle will continue to pay 15%. (but should see next paragraph)
  • Higher Capital Gains Rates for Taxpayers with Modified Adjusted Gross Income over $250,000 (joint) or $200,000 (single) will be 18.8%.

    Personal Exemptions and Phase-out Levels
    The personal exemption for tax year 2017 remains as it was for 2016: $4,050. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $261,500 ($313,800 for married couples filing jointly). It phases out completely at $384,000 ($436,300 for married couples filing jointly.)

    Limitations on Itemized Deducations
    to be claimed on tax year 2017 returns of individuals begins with incomes of $287,650 or more ($313,800 for married couples filing jointly).

    AMT Inflation Indexing
    The alternative minimum tax originally was intended to prevent high-income individuals from avoiding taxes. The Alternative Minimum Tax exemption amount for tax year 2017 is $54,300 and begins to phase out at $120,700 ($84,500, for married couples filing jointly for whom the exemption begins to phase out at $160,900). The 2016 exemption amount was $53,900 ($83,800 for married couples filing jointly). For tax year 2017, the 28 percent tax rate applies to taxpayers with taxable incomes above $187,800 ($93,900 for married individuals filing separately).