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.
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.
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