The new tax bill that takes effect in 2018 raises the standard deduction and caps certain itemized deductions. Therefore, if you will itemize your deduction in 2017, you may want to grab whatever you can this year to get the full value of those deductions. (This assumes you are not subject to AMT.) Here’s a brief summary of your options.

• State and Local Income Taxes. You can’t prepay 2018 state taxes in 2017. However, you should pay all your 2017 taxes in 2017. Specifically, if you make estimated quarterly tax payments, you should makes your 4th Quarter state/local payment by December 31, 2017 rather than wait until the deadline which is usually close to the federal deadline of January 18, 2018.
• Property Taxes. You can’t prepay 2018 property taxes in 2017. However, if you have property taxes based on 2017 assessments (partial or whole), you should make those payments by December 31, 2017. Basically, have you received a bill already? Pay it now. Some counties are actually trying to make things easier for you. See these NYT and WaPo articles for details. Things can get complicated if you usually pay via mortgage escrow.
• Charitable contributions. On a related note, you may want to make your charitable contributions by the end of 2017, as you may not be able to deduct your donations if you will fall under the standard deduction in 2018.

More: IRS Advisory, NY Times, National Law Review

In a continued attempt to better understand the 2017 federal income tax brackets, here is a graphical breakdown of a simple scenario for a married filing joint couple with no dependents. Again, I’ll try to explore the differences in terms such as gross income, taxable income, marginal tax rate, and effective tax rate. See also:

• 2017 Income Tax Brackets Example (Single)
• 2017 Income Tax Brackets Example (Married w/ 1 Child)

2017 federal income tax rates for married joint filers.

Simple example. Let’s say your combined gross income is $120,000 a year. You are a married couple with no dependents and both earn $60,000 gross income. You are both employees that receive W-2 income only (i.e. neither are self-employed). You don’t have any additional income sources like interest, capital gains, rents, etc. You don’t have any extra deductions like IRA/401k contributions or mortgage interest. You live in a state with no state income tax.

Gross income. Let’s start with your annual $120,000 gross income. You each get a personal exemption of $4,050 in 2017. You also get something called the standard deduction which is $12,700 for married filing joint in 2017. Since you don’t have a lot of itemized deductions, you use this standard deduction.

The first 20,800 of your gross income is not taxable. Without doing anything special at all, your $120,000 in gross income is now only $99,200 in taxable income after personal exemptions and the standard deductions. If you’ve already done your taxes, your taxable income should be line 43 on Form 1040, line 27 on Form 1040A, and line 6 on Form 1040EZ.

The first $18,650 of taxable income is subject to a 10% tax rate. Shave off 10% of $18,650 and put that on your tax bill ($1,865). The remaining $80,550 of taxable is moved onto the next tax bracket.

The next $57,250 in taxable income is subject to a 15% tax rate. Shave off 15% of $57,250 ($8587.50) and add that to the existing $1865. The tax bill is now $10,452.50. The remaining $23,300 of taxable is moved onto the next tax bracket.

The next $77,200 in taxable income is subject to a 25% tax rate. However, we only have $23,300 left. So we shave off 25% of $23,300 ($5825) and add that to the existing $10,452.50. The total tax bill is now $16,277.50.

In this example, this 25% is your marginal tax bracket. If you earned another $1, it would be taxed at this marginal rate of 25%.

Payroll taxes. These aren’t technically federal income taxes, but you must each pay a Social Security tax (OASDI) of 6.2% and Medicare payroll tax (HI) of 1.45% of your gross income. That’s $3,720 a year for Social Security and $870 a year for Medicare. You both earn $60,000 gross and don’t exceed the income caps. (Your respective employers pay the same amount.)

Overall effective tax rate. You paid $16,278 in federal income taxes on $120,000 of income, for an average or overall effective tax rate of 13.6%. Again, you also paid 7.65% in payroll taxes. You see that two married people earning $60k each pay the same percentage in tax as a single filer earning $60k.

The “marriage penalty” usually occurs when two individuals both with either low- or high-incomes marry. The “marriage bonus” usually comes about when the incomes are quite different. For example, a single person earning $120k in gross income would pay an extra $7,000 in income tax vs. married earning $120k.

Married earning $60k gross annually. Alternatively, a married couple earning $60k gross would pay roughly $3,000 less in income tax vs. single earning $60k (and only reach the 15% marginal tax bracket). Here’s that visualization:

Here’s a chart from OurWorldinData.org that shows how the average tax rate changes with taxable income (2016, married filing joint).

Income taxes can be hard to visualize with just a table of numbers. Below, I try to explain the 2017 tax brackets and exemptions system with graphics and simple example of a single worker. What is the difference between gross income, taxable income, marginal tax rate, and effective tax rate? Also see:

• 2017 Income Tax Brackets Example (Married No Kids)
• 2017 Income Tax Brackets Example (Married w/ 1 Child)

2017 federal income tax rates for single filers.

Simple example. Let’s say your gross income is $60,000 a year. You are single with no dependents. You are an employee that receives W-2 income only (i.e. you are not self-employed). You don’t have any additional income sources like interest, capital gains, rents, etc. You don’t have any extra deductions like IRA/401k contributions or mortgage interest. You live in a state with no state income tax.

Gross income. Let’s start with your annual $60,000 gross income. You get something called a personal exemption which is $4,050 in 2017. You also get something called the standard deduction which is $6,350 for singles in 2017. Since you don’t have a lot of itemized deductions, you use this standard deduction.

The first 10,400 of your gross income is not taxable. Without doing anything special at all, your $60,000 in gross income is now only $49,600 in taxable income after personal exemptions and the standard deductions. If you’ve already done your taxes, your taxable income should be line 43 on Form 1040, line 27 on Form 1040A, and line 6 on Form 1040EZ.

The first $9,325 of taxable income is subject to a 10% tax rate. Shave off 10% of $9,325 and put that on your tax bill ($932.50). The remaining $40,275 of taxable is moved onto the next tax bracket.

The next $28,625 in taxable income is subject to a 15% tax rate. Shave off 15% of $28,625 ($4293.75) and add that to the existing $932.50. The tax bill is now $5,226.25. The remaining $11,650 of taxable is moved onto the next tax bracket.

The next $53,949 in taxable income is subject to a 25% tax rate. However, we only have $11,650 left. So we shave off 25% of $11,700 ($2,912.50) and add that to the existing 5,226.25. The total tax bill is now $8,138.75.

In this example, this 25% is your marginal tax bracket. If you earned another $1, it would be taxed at this marginal rate of 25%.

Payroll taxes. These aren’t technically federal income taxes, but you must pay a Social Security tax (OASDI) of 6.2% and Medicare payroll tax (HI) of 1.45% of your gross income. That’s $3,720 a year for Social Security and $870 a year for Medicare. (Your employer pays the same amount.)

Overall effective tax rate. You paid $8139 in federal income taxes on $60,000 of income, for an average or overall effective tax rate of 13.6%. Again, you also paid 7.65% in payroll taxes. Here’s a chart from OurWorldinData.org that shows how the average tax rate changes with taxable income (2016, married filing joint).