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What's Trending on NP Trusts & Estates January 4, 2017 What’s trending on NP Trusts & Estates Tax related numbers for 2016-2017, CME Group launches Bitcoin reference rate and real time index, 2017 individual tax filing deadlines, income tax rates and filing thresholds, estate and gift tax exclusion amounts, and more. Here’s what’s trending in estate planning and wealth management. Wealth Management First Bitcoin Index and Reference Rate launched Bitcoin appeared in 2008 in the aftermath of the financial crisis as a new form of electronic money or “cryptocurrency.” Bitcoin’s connection to criminal activity and the “darknet markets” has cast it in an unfavorable light with government officials, law enforcement and the media, but its explosive growth over the past eight years has caught the attention of serious investors and financial institutions. In a move that will help legitimize bitcoin’s use as a financial asset, the CME (Chicago Mercantile Exchange) Group has launched its CME CF Bitcoin Reference Rate (BRR) and CME CF Bitcoin Real Time Index (BRTI) on November 13. Although other bitcoin price indexes exist, this will mark the first time a large exchange has implemented such a measure. Several leading bitcoin exchanges and trading platforms will provide real-time pricing data to CME. The BRR combines the trade flow of these exchanges throughout the day and calculates a daily reference rate for the U.S. dollar price of one bitcoin (Click here to view the current BRR for one bitcoin). Meanwhile, the BRTI will reflect aggregate global buy and sell demand into a consolidated order book that will reflect the current price of one bitcoin in U.S. dollars. According to CME, these two numbers will be standardized and spot checked with independent oversight, and will be used to quicken the authentication of “digital assets” as a new asset class. What does this mean for investors? They will most likely see futures and options based on the bitcoin index and new ETFs for digital currencies in the near future, as well as new This newsletter is intended as an information source for the clients and friends of Nixon Peabody LLP. The content should not be construed as legal advice, and readers should not act upon information in the publication without professional counsel. This material may be considered advertising under certain rules of professional conduct. Copyright © 2016 Nixon Peabody LLP. All rights reserved. innovations for worldwide trade and lower costs due to a single, uniform currency whose price is visible to all. There are many potential advantages for digital currencies, and those who participate will be in the best position to gain from their promising future. — Thomas A. Stedman Income Tax Planning Individual income, gift and estate tax related numbers for 2016-2017 The following list contains some of the "number" changes (many based on mandated inflation adjustments) that you might find interesting and helpful for 2017 tax and estate planning *(with 2016 comparative numbers). Federal Income Tax Items 2016 2017 Top federal marginal tax rate for ordinary income 39.6% 39.6% (applicable for taxable income over $466,950 joint and $415,050 single in 2016 and $470,700 joint and $418,400 single in 2017); lower tax brackets are 10%, 15%, 25%, 28%, 33% and 35% in 2016 and 2017 Federal tax rate for long-term capital gains (assets 0% 0% held for more than one year) and qualified dividends for individuals in the 10% and 15% tax brackets (taxable income of up to $75,300 joint and $37,650 single in 2016 and $75,900 joint and $37,950 single in 2017) Federal tax rate for long-term capital gains (assets 15% 15% held for more than one year) and qualified dividends for individuals in the 25%, 28%, 33% and 35% brackets (taxable income between $75,300 and $466,950 joint and $37,650 and $415,050 single in 2016 and between $75,900 and $470,700 joint and $37,950 and $418,400 single in 2017) Federal tax rate for long-term capital gains (assets 20% 20% held for more than one year) and qualified dividends for individuals in the 39.6% bracket (taxable income over $466,950 joint and $415,050 single in 2016 and $470,700 joint and $418,400 single in 2017) Federal tax rate on the portion of long-term gain 25% 25% from real estate that represents depreciation recapture (so-called “Section 1250 gain”) Federal tax rate on long-term gain from collectibles 28% 28% (e.g., art, antiques, precious metals, gems, stamps, coins, etc.) Federal tax rate on long-term gain on small business 28% 28% stock eligible for the 50% exclusion Standard deduction Married filing jointly $12,600 $12,700 Head of household $9,300 $9,350 Single or married filing separate returns $6,300 $6,350 Additional amount for over 65 or blind Married filing jointly $1,250 $1,250 Single $1,550 $1,550 Net unearned income of children under age 19 and $2,100 $2,100 dependent full-time students under age 24 that escapes the “kiddie” tax (child taxed at parent’s marginal rate) “Kiddie tax” standard deduction $1,050 $1,050 Personal exemption amount (subject to “phase out,” $4,050 $4,050 as noted below) Range of Adjusted Gross Income (AGI) where the personal exemption “phases out” Married filing jointly $311,300– $313,800– $433,800 $436,300 Head of household $285,350– $287,650– $407,850 $410,150 Single $259,400– $261,500– $381,900 $384,000 Married filing separately $155,650– $156,900– $216,900 $218,150 Applicable amount of AGI after which itemized deductions are reduced by 3% of AGI over this applicable amount—the “Pease Limitation” Married filing jointly $311,300 $313,800 Head of household $285,350 $287,650 Single $259,400 $261,500 Married filing separately $155,650 $156,900 Taxable wage base for Social Security and self- $118,500 $127,200 employment income Social Security COLA (cost of living adjustment) 0.0% 0.3% Additional Medicare tax on wages and self- employment income when wages and self- employment income exceed the following thresholds: Married filing jointly—$250,000 0.9% 0.9% Married filing separately—$125,000 Single/Head of household—$200,000 Medicare surtax on investment income when Modified Adjusted Gross Income (MAGI) (which is AGI plus foreign earned income) exceeds the following thresholds: Married filing jointly—$250,000 3.8% 3.8% Married filing separately—$125,000 Single/Head of household—$200,000 Tax is assessed on the smaller of the filer’s net investment income or the excess of MAGI over the applicable threshold amount Maximum alternative minimum tax (AMT) rate on 28% 28% AMT income over $186,300 in 2016 and $187,800 in 2017; below these amounts, the AMT rate is 26% Alternative minimum tax (AMT) exemption: Married filing jointly $83,800 $84,500 Single $53,900 $54,300 Married filing separately $41,900 $42,250 Range of AMT taxable income where the AMT exemption “phases out” Married filing jointly $159,700– $160,900– $494,900 $498,900 Single $119,700– $120,700– $335,300 $337,900 Married filing separately $79,850– $80,450– $247,450 $249,450 Health Savings Account (HSA) annual contribution: Family $6,750 $6,750 Single $3,350 $3,400 Additional “catch-up” contributions for individuals $1,000 $1,000 aged 55 or older Maximum traditional and Roth IRA contributions $5,500 $5,500 Additional “catch-up” contributions for individuals aged 50 or older $1,000 $1,000 AGI phase-out range for Roth IRA contributions Married filing jointly $184,000– $186,000– $194,000 $196,000 Single/Head of household $117,000– $118,000– $132,000 $133,000 Maximum elective deferrals for 401(k) plans, 403(b) $18,000 $18,000 plans, governmental 457 plans and SARSEPs Additional catch-up contributions for above plans for $6,000 $6,000 those aged 50 or older Maximum deferral for SIMPLE plans $12,500 $12,500 Additional catch-up contributions for SIMPLE plans $3,000 $3,000 for those aged 50 or older Maximum deferral for non-governmental 457 plans $18,000 $18,000 (catch-up contribution is not allowed) Maximum compensation limit for defined $265,000 $270,000 contribution retirement plan purposes Maximum contribution limit for defined $53,000 $54,000 contribution plans Defined benefit plan limit $210,000 $215,000 Maximum Qualified Charitable Distribution (QCD, $100,000 $100,000 or a taxable distribution from an IRA owned by an individual over 70 ½ that is paid directly from the IRA to a qualified charity. QCD amount may be excluded from income and also may be used to satisfy the Required Minimum Distribution amount. QCD is not taken into account in determining any deduction for charitable contributions) Maximum foreign earned income exclusion $101,300 $102,100 Business mileage rate (per mile) $0.54 $0.535 Charitable mileage rate (per mile) $0.14 $0.14 Medical and moving mileage rate (per mile) $0.19 $0.17 AGI threshold for deducting qualified medical expenses Under age 65 10% 10% Over age 65 7.5% 10% Estimated tax payments and withholding required to avoid penalties: Percentage of current year tax liability or 90% 90% Percentage of prior year tax liability: if AGI is $150,000 or less 100% 100% if AGI is greater than $150,000 110% 110% “General” IRS interest rate on overpayments and 1st Q–3% 1st Q–4% underpayments 2nd Q–4% 2nd Q–TBD 3rd Q–4% 3rd Q–TBD 4th Q–4% 4th Q–TBD Amount of compensation that triggers withholding $2,000 $2,000 and FICA responsibility for domestic employees (“nanny tax”) Maximum amount of business equipment that can be $500,000 $510,000 immediately expensed under Section 179 (rather than capitalized and depreciated) Maximum amount of additional first-year 50% 50% depreciation (“Bonus Depreciation") applied to the adjusted basis of qualified
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