Every year, the IRS adjusts more than 40 tax provisions for inflation. This is done to prevent what is called “bracket creep.” This is the phenomenon by which people are pushed into higher income tax brackets or have reduced value from credits or deductions due to inflation, instead of an increase in real income.
The IRS uses the Consumer Price Index (CPI) to calculate the past year’s inflation and adjusts income thresholds, deduction amounts, and credit values accordingly.
Estimated Income Tax Brackets and Rates
In 2017, the income limits for all tax brackets and all filers will be adjusted for inflation and will be as follows (Table 1). The top marginal income tax rate of 39.6 percent will hit taxpayers with taxable income of $418,400 and higher for single filers and $470,700 and higher for married couples filing jointly.
| Rate | Taxable Income Bracket | Tax Owed |
|---|---|---|
|
10% |
$0 to $9,325 | 10% of Taxable Income |
|
15% |
$9,325 to $37,950 | $932.50 plus 15% of the excess over $9325 |
|
25% |
$37,950 to $91,900 | $5,226.25 plus 25% of the excess over $37,950 |
|
28% |
$91,900 to $191,650 | $18,713.75 plus 28% of the excess over $91,900 |
|
33% |
$191,650 to $416,700 | $46,643.75 plus 33% of the excess over $191,650 |
|
35% |
$416,700 to $418,400 | $120,910.25 plus 35% of the excess over $416,700 |
|
39.60% |
$418,400+ | $121,505.25 plus 39.6% of the excess over $418,400 |
| Rate | Taxable Income Bracket | Tax Owed |
|---|---|---|
|
10% |
$0 to $18,650 | 10% of taxable income |
|
15% |
$18,650 to $75,900 | $1,865 plus 15% of the excess over $18,650 |
|
25% |
$75,900 to $153,100 | $10,452.50 plus 25% of the excess over $75,900 |
|
28% |
$153,100 to $233,350 | $29,752.50 plus 28% of the excess over $153,100 |
|
33% |
$233,350 to $416,700 | $52,222.50 plus 33% of the excess over $233,350 |
|
35% |
$416,700 to $470,700 | $112,728 plus 35% of the excess over $416,700 |
|
39.60% |
$470,700+ | $131,628 plus 39.6% of the excess over $470,700 |
| Rate | Taxable Income Bracket | Tax Owed |
|---|---|---|
|
10% |
$0 to $13,350 | 10% of taxable income |
|
15% |
$13,350 to $50,800 | $1,335 plus 15% of the excess over $13,350 |
|
25% |
$50,800 to $131,200 | $6,952.50 plus 25% of the excess over $50,800 |
|
28% |
$131,200 to $212,500 | $27,052.50 plus 28% of the excess over $131,200 |
|
33% |
$212,500 to $416,700 | $49,816.50 plus 33% of the excess over $212,500 |
|
35% |
$416,700 to $444,500 | $117,202.50 plus 35% of the excess over $416,701 |
|
39.60% |
$444,550+ | $126,950 plus 39.6% of the excess over $444,550 |
| Source: IRS. | ||
Standard Deduction and Personal Exemption
The standard deduction for single filers will increase by $50 and $100 for married couples filing jointly (Table 4).
The personal exemption for 2017 remains the same at $4,050.
| Filing Status | Deduction Amount |
|---|---|
| Single | $6,350 |
| Married Filing Jointly | $12,700 |
| Head of Household | $9,350 |
| Personal Exemption | $4,050 |
| Source: IRS. | |
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