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Tax changes you need to know for 2018 Tax Cuts and Jobs Act

Here are some of the most prominent changes that could affect you

Ø Standard Deduction

Ø  Those who are married and filing jointly will have an increased standard deduction of $24,000, up from the $13,000 it would have been under previous law.

Ø  Single taxpayers and those who are married and file separately now have a $12,000 standard deduction, up from the $6,500 it would have been for this year prior to the reform.

Ø  For heads of households, the deduction will be $18,000, up from $9,550.

Ø  If you are age 65 or older, blind or disabled, you can tack on $1,300 to your standard deduction ($1,600 for unmarried taxpayers).

Ø Personal exemption has been eliminated with the tax reform bill.

Ø Top income tax rate

A new 37 percent top rate will affect individuals with incomes of $500,000 and higher. The top rate kicks in for married taxpayers who file jointly at $600,000 and up.

The new tax law also includes changes to other tax brackets.    

For comparison, here would be the 2018 brackets under the current tax law, adjusted for inflation.

Federal tax brackets: 2017 tax brackets

Tax rate

Single

 Head of household

10%

Up to $9,325

    Up to $13,350

15%

$9,326 to $37,950

    $13,351 to $50,800

25%

$37,951 to $91,900

    $50,801 to $131,200

28%

$91,901 to $191,650

   $131,201 to $212,500

33%

$191,651 to $416,700

   $212,501 to $416,700

35%

$416,701 to $418,400

   $416,701 to $444,550

39.6%

$418,401 or more

   $444,551 or more

Tax rate

Married filing jointly or qualifying widow

Married filing separately

10%

Up to $18,650

    Up to $9,325

15%

$18,651 to $75,900

    $9,326 to $37,950

25%

$75,901 to $153,100

    $37,951 to $76,550

28%

$153,101 to $233,350

    $76,551 to $116,675

33%

$233,351 to $416,700

    $116,676 to $208,350

35%

$416,701 to $470,000

    $208,351 to $235,350

39.6%

$470,001 or more

    $235,351 or more

 

Federal tax brackets: 2018 tax brackets

Tax rate

Single

Head of household

10%

Up to $9,525

Up to $13,600

12%

$9,526 to $38,700

$13,601 to $51,800

22%

$38,701 to $82,500

$51,801 to $82,500

24%

$82,501 to $157,500

$82,501 to $157,500

32%

$157,501 to $200,000

$157,501 to $200,000

35%

$200,001 to $500,000

$200,001 to $500,000

37%

$500,001 or more

$500,001 or more

Tax rate

Married filing jointly or qualifying widow

Married filing separately

10%

Up to $19,050

Up to $9,525

12%

$19,051 to $77,400

$9,525 to $38,700

22%

$77,401 to $165,000

$38,701 to $82,500

24%

$165,001 to $315,000

$82,501 to $157,000

32%

$315,001 to $400,000

$157,001 to $200,000

35%

$400,001 to $600,000

$200,001 to $300,000

37%

$600,001 or more

$300,001 or more

 

Ø Child tax credit

The child tax credit has been raised to $2,000 per qualifying child, those who are under 17, up from $1,000. A $500 credit is available for dependents who do not get the $2,000 credit. Phases out over income limits and eliminated for those with income over 200K single 400K Married Filing Jointly.

ØNew tax credit for non-child dependents, like elderly parents

$500 credit for non child dependent

Ø Mortgage interest

The deduction for interest is capped at $750,000 for mortgage loan balances taken out after Dec. 15 of last year. The limit is still $1 million for mortgages that were established prior to Dec. 15, 2017. No more Home Equity loan deductions.

Ø State and local taxes

The itemized deduction is limited to $10,000 for both income and property taxes paid during the year.

Ø Contribution limits for retirement savings

Employees who participate in certain retirement plans ‒ 401(k), 403(b) and most 457 plans, and the Thrift Savings Plan – can now contribute as much as $18,500 this year, a $500 increase from the $18,000 limit for 2017.

 

Ø Savings in IRAs

Savers who contribute to individual retirement accounts will have higher income ranges following cost-of-living adjustments. Note that the deduction phases out for individuals and their spouses who are covered by workplace retirement plans.

For single taxpayers, the limit will be $63,000 to $73,000.

For married couples, the phaseout range will vary depending on whether the IRA contributor is covered by a workplace retirement plan or not. When the spouse who is investing has access to an employer plan, the range is $101,000 to $121,000. For individuals who don't have a retirement plan but are married to someone who does, the phaseout has been raised to $189,000 to $199,000.

The phaseout was not adjusted for married individuals who file a separate return and who are covered by a workplace retirement plan. That range is $0 to $10,000.

Ø Contributions to Roth IRAs

For individuals who are single or the heads of their households, the income phaseout has been raised to $120,000 to $135,000. For married couples who file jointly, the range climbs to $189,000 to $199,000.

The phaseout was not adjusted for married individuals who file a separate return. That is $0 to $10,000.

Ø Miscellaneous Itemized Deductions Suspended

 

Ø  Unreimbursed employee expenses

Ø  All other 2% miscellaneous deductions Suspended – Advisor fees, Tax Prep Fees,

Ø  Hobby expenses

Ø  Advisory Fees

Ø  Tax Preparation fees

Ø  Job Hunting expneses

Ø  Legal fees for collecting or protecting taxable income

Ø  Safe deposit boxes

Ø  Trust administration fees

 

Ø Schedule A or Itemized Deductions

Medical expenses back to 7.5 % of AGI

Casualty and theft loss gone

Ø Other

Moving Expenses gone except military

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