At last, 2016 is almost done and in the books. Though you might not feel any different on January 1st—well, maybe a little worse for wear—2017 has a bunch of new stuff for you and your finances. Let’s look at what the new year has to offer.
1. New tax rates
A great deal of the changes in 2017 will likely come from President-elect Trump’s plans – most of which are up in the air. The most obvious one when it comes to your wallet is tax policy; Trump favors significant tax cuts, which strongly favor the wealthy. Most people will get a boost, but not everyone.
According to the nonpartisan Tax Policy Center, if you’re a single parent with two kids making $75,000 with no childcare costs, you would see a $2,440 increase in your income tax. If you’re in that same situation with $50,000 in income, you’d see a tax increase of $1,188. A married couple making $50,000 in that same situation would see a $150 tax hike.
2. Lower capital gains taxes
The lower tax rates also mean that if you’re into juggling stocks, short-term capital gains will be taxed less since they’re taxed just like ordinary income.
3. 2017 is a great time to die if you’re one of the richest 5,330 families in the country
Donald Trump wants to get rid of the estate tax, meaning that if you’re involved in one of the 5,330 estates over $5.45 million, 2017 will be a better time to die—financially speaking. If Trump kills the estate tax, these wealthy families will avoid the estate tax which can claim up to 40% of an inheritance.
4. Obamacare in trouble
Healthcare is another moving target in the new year. Under the Affordable Care Act, or Obamacare, 20 million people have gained insurance. If the Republican-controlled government decides to dismantle it without a workable alternative, or strip its funding, it could potentially leave millions without affordable health care.
5. The fiduciary rule may come into effect
The Department of Labor’s fiduciary rule, set to go into effect in April, will require financial advisors to act in the best interests of their clients – and in the process curb the loss of around $17 billion annually to conflicted advice. However, some people are in doubt as to whether this will actually happen, given Republican animus to the rule. For you, that means it will still be important to have a frank conversation with your advisor about their standard of advice to make sure you know what you’re getting.
6. Social Security raises
In 2017, people getting Social Security benefits will see a very modest 0.3% cost of living adjustment, raising the average monthly check by around $5 to $1,360. However, this may be offset by rising Medicare costs.
7. Roth IRA eligibility increases
Roth IRA limits on eligibility are also getting a mild increase, meaning you’re still eligible to max out a Roth IRA if you make $118,000 and are unmarried. The contribution limits, however, stay at $5,500.
8. Baby boomers are turning 70-and-a-half
Finally, the oldest boomers are hitting the age when they’re required to take money out of their retirement plans—70 1/2. If they don’t remember to do these required minimum distributions, the money left in can be taxed at a whopping 50%. Your first RMD must be taken by April 1 of the year after you turn 70 1/2.