IRS Releases 2018 Inflation Adjustments To Tax Provisions

IRS Releases 2018 Inflation Adjustments To Tax Provisions

The 2018 tax year annual inflation adjustments, which affect more than 50 tax provisions, have been announced by the Internal Revenue Service. Revenue Procedure 2017-58 (Oct. 19, 2017). Here is a summary of what to expect:

Standard deduction: For married couples that file jointly in the 2018 tax year, the standard deduction will be $13,000.00, an increase of $300.00 from the 2017 tax year. The standard deduction will be $6,500.00 for single taxpayers as well as married individuals that file separately, an increase of $150.00 from the 2017. The standard deduction will be $9,550.00 for heads of households, an increase of $200.00 from the 2017 tax year.

Personal exemption: For tax year 2018, the personal exemption will be $4,150.00 compared with $4,050.00 in 2017. This exemption contains a phase-out beginning with an adjusted gross income (AGI) of $320,000.00 for married couples that file jointly, or $266,700.00 for single taxpayers that are not head of household or a surviving spouse. It completely phases out at $442,500.00 for married couples that file jointly, or $389,200.00 for single taxpayers that are not head of household or surviving spouse.

Marginal rate: In the 2018 tax year, a 39.6% tax rate will affect single taxpayers with incomes exceeding $426,700.00, compared with $418,400.00 in 2017. The 39.6% tax rate will affect married couples that file jointly with incomes exceeding $480,050.00, compared with $470,700.00 in 2017. The Revenue Procedure also details the income tax thresholds for marginal rates of 10%, 15%, 25%, 28%, 33% and 35%.

Itemized deduction: For tax year 2018, individuals with incomes of at least $266,700.00 (or $320,000.00 for married couplies that file jointly) will be subject to a limitation on the itemized deductions that can be claimed.

Alternative minimum tax: In the 2018 tax year, the alternative minimum tax exemption amount is $55,400.00 (up from $54,300.00 in 2017), which starts phasing out at $123,100.00. The exemption is $86,200.00 (up from $84,500.00 in 2017) for married couples that file jointly, which begins to phase out at $164,100.00. For taxpayers whose taxable incomes exceed $191,500.00 (or $95,750.00 for married individuals that file separately), a 28% tax rate applies.

Earned income credit: For the 2018 tax year, taxpayers who file jointly that have at least three qualifying children get a maximum earned income credit equaling $6,444.00 (compared with $6,318.00 in 2017). Maximum credit amounts for phase-outs, income thresholds and other categories are addressed in the Revenue Procedure.

Annual gift exclusion: For the 2018 tax year, the annual exclusion for gifts is $15,000.00, up from $14,000.00 in the 2017 tax year.

Estate tax exclusion: The estate of a decedent dying in the 2018 calendar year will have a basic exclusion amount totaling $5,600,000.00, an increase of $110,000.00 compared with the 2017 tax year.

By | 2017-11-01T23:58:40+00:00 November 1st, 2017|

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