Now that we are well into the final quarter of the year, it’s time to think ahead to what is approaching taxpayers in just few short months. At this time every calendar year, the various government agencies release updated figures for a range of items such as retirement contribution limitations, gift & estate tax exemptions and Social Security COLA adjustments. Though president-elect Trump included modifications to some of these numbers in his campaign platform, the figures listed below will go into effect on January 1, 2017 prior to inauguration. Here is a catalog of what we feel our clients need to know in the year to come:

• Estate and Gift Tax Exemption: The IRS has announced the per person exemption will increase to $5.49 million in 2017, up from $5.45 million in 2016. This means a married couple can leave up to $10.98 million to their heirs free of estate tax. Any assets above that amount will be subject to estate tax, which will remain at the 40% top federal tax rate in 2017.

• Annual Gift Exclusion: The per person annual gift exclusion will remain unchanged in 2017 at $14,000 per person. Any gifts above that amount will count against the giftor’s lifetime exemption amount ($5.49 million) and will require the filing of a gift tax return.

• Social Security COLA: Social Security (SS) recipients will enjoy a 0.3% Cost of Living Adjustment (COLA) in 2017. Looking back, the COLA in 2016 was 0% and 2015 saw a 1.7% COLA. For the average SS recipient, a 0.3% increase amounts to less than $5 more per month. And, unfortunately, an expected increase in Medicare Part B premiums (which are typically deducted from Social Security payments) will likely offset the added benefit.

• Personal Exemption: The personal exemption amount will increase to $4,050 (from $4,000) per person, with a phase out starting when adjusted gross income reaches $313,800 for married couples filing jointly, and $261,500 for individual filers.

• AMT Exemption: Resulting from the American Taxpayer Relief Act of 2012 (ATRA), the AMT exemption amounts are now “permanently” inflation adjusted. For 2017, the AMT exemption for individual filers is set at $54,300, and $84,500 for those married filing jointly.

• Medical Expenses: Starting in 2017, the floor for medical expenses is 10% of adjusted gross income for all taxpayers, regardless of age. In prior years, those over age 65 were held to a floor of only 7.5% of adjusted gross income.

• Retirement Contribution Limits: As expected, the IRS has left the Traditional 401(k)/403(b)/457 elective deferral limit (the limit on employees’ personal contributions,) at $18,000 per year, with a catch up contribution of $6,000 per year for those age 50 and above. The total of employee plus employer contribution limits has increased by $1,000 to $54,000 per year.

• Qualified Charitable Distributions (QCD): After years of last minute indecision followed by lapses, then extensions by Congress, the QCD was officially made permanent at the end of 2015 via The PATH Act. This remains unchanged, but as we near December 31st again, it is always good to think about how to take advantage of this valuable tool. Those over age 70½  and subject to Required Minimum Distributions are allowed to distribute up to $100,000 from a qualified IRA — or other qualified retirement plan, such as a 401(k) — tax free if it is distributed directly to a qualified charity. The tax savings alone is a huge benefit, as $100,000 of ordinary income would have essentially cut that distribution in half after paying income tax for those at the highest marginal tax rates. And for those who are already charitably inclined, the ability to give the pre-tax amount is immensely appealing.

The above list is just a few of the changes that will affect taxpayers in 2017. If you have questions about these updates and how they may impact your overall financial situation, feel free to reach out to your Sand Hill Wealth Manager. We are always available to walk you through the changes and work collaboratively with both you and your CPA to determine how to best navigate the new tax year.