Recent Tax Updates
2018 FICA Limit Increase
The 2018 FICA limit has increased from $127,200 in 2017 to $128,400 in 2018. The Social Security Administration had originally announced that the increase would be $128,700, however, this increase was revised after receiving additional salary data that had not been included in the original calculation. The wage base calculation is determined by annual increases in a national wage index. Mobility professionals must be aware of this change as it relates to gross-ups and payroll calculations.
For questions related to gross-up calculations and audits, please reach out to Mary Reilly at 303.219.7291 or firstname.lastname@example.org.
First Quarter 2017 State Tax Updates
As we get further into 2017, many states are releasing tax updates for the current tax year. We are working hard to ensure we have the most accurate data available for our client’s tax calculations. Below are some of the most recent state updates included in that were released at the end of the first quarter.
- Arkansas increased the exemption credit to $26 per person, and the standard deduction to
$2,200 for single filers and $4,400 for joint filers
- The District of Columbia increased the standard deduction to $5,650 for single filers, $10,275 for joint filers and $7,800 for Head of Household filers
- Missouri’s brackets increased by 0.80%
- Montana increased the exemption amount to $2,400 and increased standard deduction ranges to $2,000 – $4,510 for singles and $4,000 – $9,020 for joint and head of household filers
- New York’s brackets increased slightly, and the standard deduction increased to $8,000 for single filers, $16,050 for joint filers and $11,200 for head of household filers
- North Carolina’s deductions increased to $8,750 for single filers, $17,500 for joint filers and $14,000 for head of household filers
- Oregon increased the first two brackets to $3,400 and $8,500 for single filers and $6,800 and $17,000 for joint filers. They also increased the exemption credit to $197. South Carolina increased the income brackets by 0.34%.
- Vermont increased the income brackets by about 0.80%.
- Wisconsin increased the income brackets by about 1% and increased the standard deductions to $10,380 for single filers, $19,210 for joint filers, $13,400 for head of household filers and $9,130 for married filing separate filers
In addition to the above changes for 2017, a few states have enacted legislation affecting tax years beyond 2017. Beginning in 2018 Georgia will have a flat tax rate of 5.40% instead of multiple rates. Standard deductions and exemptions will remain the same.
Starting in 2019, Arkansas will change their rate structure. For individuals with income between $21,000 and $75,000, the rate on the first $4,300 of income is reduced from 0.90% to 0.75%. For those with income lower than $21,000, the rate on the first $4,300 of income is reduced from 0.90% to 0%; from income of $4,300 to $8,400 the rate drops from 2.40% to 2%, on income from $8,400 to $12,600 the rates drop from 3.40% to 3%, and on income from $12,600 to $21,000 the rate drops from 4.40% to 3.40%.
2017 Federal Tax Updates
2017 Federal taxes and gross-up percentages proved to be straight forward. The brackets for all filing statuses were increased due to inflation. In addition, the standard deduction and the phase-out amounts for personal exemptions and itemized deductions increased as well. There is no increase in personal exemption for 2017. The Foreign Earned Income Exclusion increased to $102,100.
The big news for 2017 is the FICA earnings limit increase. After seeing no change in the earnings limit in 2016, it has increased to $127,200 for 2017. The reason there was no change in 2016 is there was no adjustment to social security benefits in 2016; the law does not allow a contribution increase without a benefit increase. For 2017, there is a 0.3% adjustment for benefits so they are allowed to increase the contributions level as well. The large jump is due to two years of inflation being accounted for.
For Ineo clients running our MoveTrack™ assignment software, all these updates have been made. We also significantly expanded the Global Cost Estimator tool with functionality to calculate global cost estimates for short-term assignments, permanent moves, as well as in-country moves. There’s been as a significant increase in countries served, now standing at 80+.
The presidential election leads most to anticipate changes coming regarding income taxes in the U.S. These are currently speculative as they are based on a proposal that would need to pass Congress in part or whole. The changes that would most directly affect our tax calculations are new tax brackets, different standard deduction amounts, the elimination of the personal exemption, and limits on itemized deductions.
The proposed tax brackets for married filing joint returns are 12% on income less than $75,000, 25% on income of $75,000 to $225,000, and 33% on income greater than $225,000. The brackets for single filers would be half of these amounts. The standard deduction would increase to $30,000 for joint filers and $15,000 for single filers. Itemized deductions would be capped at $200,000 for joint filers and $100,000 for single filers.
There is potential that some adjustments made would be retroactive to January 1, 2017. We are working hard following all possible changes and will be updating our software promptly to keep our tax calculations as accurate as possible.
2017 Federal Tax Information and Gross-up Percentages
This handy guide provides frequently sought after tax information, rates, and gross-up percentages for 2017, along with a comparison to 2016 data.Download PDF