It seems that one constant in life is the ever rising cost of living. If you do a quick Google search on the cost of living in 1956, the year of Dermody, Burke and Brown's founding, you can see that the average cost of a gallon of gas was .22 cents, a pound of coffee was .85 cents and a car was $2,050. It is important that tax code adjustments are made as incomes and expenses increase over time. Some of these amounts are fixed and can only be changed by statute, but some were designed with these increases in mind. Often they are tied to the consumer price index so that they automatically adjust annually for cost of living fluctuations. As we steadily march towards the close of 2016, let's take a moment to look at some of the most common adjustments for the upcoming year.

Social Security

In October 2016, the Social Security Administration announced that recipients of Social Security and Supplemental Security Income (SSI) will increase by 0.3%. SSI beneficiaries will see this cost-of-living adjustment beginning December 30, 2016, with Social Security beneficiaries receiving their adjustment beginning in January 2017. Of course, with social security benefits on the rise, one can correctly assume that withholdings will increase as well. While the social security tax rate remains the same in 2017, the maximum amount of earnings subject to the tax is increasing. Currently the social security tax is 7.65% (15.30% if self-employed) on the first $118,500 of earned income. This cap rises to $127,200 in 2017. It is important to note that there is no cap on earnings for the 1.45% (2.90% if self-employed) Medicare tax.

Traditional and Roth IRAs

There are also some changes in store for those contributing to various tax favored retirement plans, but for the most part, contributions limits are unchanged. The maximum contribution to a Traditional or Roth IRA remains at $5,500. If you turn 50 before year-end, you can increase that amount by $1,000. Be warned, however, the limit is for both types of IRA accounts combined, not separately. If you are under 50 and contribute $3,000 to each type of account for a total of $6,000, $500 would be considered an excess contribution and subject to a 6% penalty unless you take action to correct the situation. For either type of plan, you have until you file your return, not including extensions, to make these contributions.

Income limitations for these IRAs are changing in 2017. With a Traditional IRA, your contributions are tax deductible depending on your income and if you are covered by an employer's retirement plan. If you have taxable compensation and are not covered by an employer's plan, your Traditional IRA contributions are completely deductible, up to the contribution limitation. For 2017, if you are single and covered by an employer's plan, the deductibility of your IRA contributions begin to phase-out at $62,000 (up from $61,000) and is completely eliminated at $72,000 (up from $71,000). For a married filing joint taxpayer covered by an employer's plan the phase-out is $99,000 - $119,000 (up from $98,000 - $118,000). There is also a provision for a married filing joint taxpayer who is not covered by an employer's plan, but their spouse is covered. In this case, the phase-out range for the uncovered spouse is $186,000 - $196,000 (up from $184,000 - $194,000). These phase-outs only apply to the deductibility of your contribution. You are permitted to contribute up to the annual limitation as long as you have taxable compensation. Regardless of deductibility, you should always inform your tax preparer of any Traditional IRA contributions you have made during the year. Even if you made non-deductible contributions, they will have an impact when you begin to take distributions from your IRA. Unlike a Traditional IRA, where money can be contributed tax free, Roth IRA contributions are funded with after tax dollars. The advantage of a Roth is that distributions are tax free at retirement age. In this case, the income limits on taxable compensation income relates to the amount you are permitted to contribute and not deductibility. For 2017, the phase-out range is $118,000 - $133,000 (up from $117,000 - $132,000) for single filers and $186,000 - $196,000 (up from $184,000 - $194,000) for those married filing jointly. Once you have exceeded the upper end of these ranges, you are no longer able to contribute to a Roth IRA.