How Much Will I Pay in 2017 Taxes if I Make $100,000?

By Dan Caplinger Markets Fool.com

Getting an early read on how much you'll owe in income tax is important. If you know what your tax bill is likely to be, then you can make plans now to make sure you don't have any unpleasant surprises come tax time. With the new Trump administration having just taken office, there's some uncertainty about what 2017 taxes will look like. But you can make good estimates based on two possibilities: that current law continues or that the Trump tax proposal becomes law.

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What a $100,000 earner would pay in taxes in 2016

One thing to keep in mind is that every $100,000-earning taxpayer will have a different tax bill because of other factors that affect taxes. Your marital status, the number of children you have, the expenses you have, and the other sources of income outside your work you have all have an impact on the amount of tax you owe.

Image source: Getty Images.

However, to keep things simple, we'll talk about two hypothetical taxpayers:

  • A single taxpayer with no children who has no outside income, takes the standard deduction, and contributes $5,000 to either a deductible traditional IRA or a 401(k) plan at work.
  • A married taxpayer filing jointly with two children, again with no outside income, taking the standard deduction, and contributing $5,000 to tax-favored retirement accounts.

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Here's a quick look at how to calculate tax liability on the tax return you're about to file this season, for the 2016 tax year:

Category

Single Example

Married Example

Starting earnings

$100,000

$100,000

Retirement account contribution

($5,000)

($5,000)

Standard deduction

($6,300)

($12,600)

Personal exemptions

($4,050)

($16,200)

Taxable income

$84,650

$66,200

Tentative tax

$16,934

$9,003

Child tax credit

$0

$2,000

Final tax bill

$16,934

$7,003

Calculations by author.

What 2017 would look like under current law

If tax laws don't change in 2017, then the calculation looks much the same. The only differences are in the tax brackets and the standard deduction, which rise slightly due to inflation.

Category

Single Example

Married Example

Starting earnings

$100,000

$100,000

Retirement account contribution

($5,000)

($5,000)

Standard deduction

($6,350)

($12,700)

Personal exemptions

($4,050)

($16,200)

Taxable income

$84,600

$66,100

Tentative tax

$16,889

$8,983

Child tax credit

$0

$2,000

Final tax bill

$16,889

$6,983

Calculations by author.

What 2017 would look like under the Trump tax plan

Under the Trump tax plan, taxes would look a lot different. Retirement account contributions would still be deductible, but personal exemptions would go away in favor of a large standard deduction. Some of the details still haven't been ironed out, but using the proposed tax brackets in the plan would produce the following tax bill:

Category

Single Example

Married Example

Starting earnings

$100,000

$100,000

Retirement account contribution

($5,000)

($5,000)

Standard deduction

($15,000)

($30,000)

Taxable income

$80,000

$65,000

Tentative tax

$15,125

$7,800

Child tax credit

$0

$2,000

Final tax bill

$15,125

$5,800

Calculations by author.

It's not entirely clear whether the Trump tax plan would preserve the child tax credit in its current form or replace it with other incentives based on child care. However, the example above shows how even though taxable income won't change that much as a result of the proposed reforms, the combination of some minor taxable income reductions and the impact of replacing the current 10% and 15% brackets with a 12% bracket creates substantial tax savings.

Keep your eyes on Washington

The federal government has the right to change tax laws all the way until the end of the year -- and then some, based on a few extraordinary situations in which lawmakers imposed retroactive changes all the way back to the beginning of the previous year. That said, there has been some disagreement between the White House and Capitol Hill regarding exactly what shape tax reform should take, and intra-party squabbling has some policymakers thinking that tax reform itself is at risk of not getting done this year. Moreover, even if a tax bill does become law, elected officials might decide it's easier to implement the changes for 2018 rather than trying to make them retroactive to the 2017 tax year.

Nevertheless, it's valuable to take a look at these different proposals to see how they might affect you. That way, you'll be prepared for whatever comes, and you'll be better able to assess any alternative proposals that might arise in the coming months.

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