December 2016 Tax Snacks

December 2016 Tax SnacksTax Snacks: Bite-size tax news and information on the fly

Dates to Remember

January 16: Fourth quarter estimates are due for individuals and most trusts and estates
January 31: Forms 1099-MISC reporting nonemployee compensation are due

Maine individual tax increase

Last month, Maine voters approved a ballot question that adds an additional 3% tax on the portion of individuals’ annual taxable income that exceeds $200,000. This tax is effective beginning with 2017 tax returns – not the 2016 tax returns to be filed beginning next month.

This results in a statutory rate of 10.15% for top earners in Maine. Although it has been observed that this leaves only California with a higher income tax rate, this is a bit misleading, because for a wide range of incomes, Maine taxpayers will experience a higher rate than in California (highest in the nation). For instance, based on 2016 brackets, married taxpayers filing jointly with income between approximately $200,000 and $500,000 would have a portion of their incomes taxed at 10.15% by Maine, but 9.3% by California.

Social Security wage base increases significantly for 2017

The amount of wages subject to the 6.2% Social Security tax remained flat from 2015 to 2016 at $118,500. However, it will increase to $127,200 beginning in 2017.  The 1.45% Medicare tax continues to have no ceiling.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.