The Internal Revenue Service today announced the tax year 2018 annual
inflation adjustments for more than 50 tax provisions, including the tax rate
schedules and other tax changes. Revenue
Procedure 2017-58 provides details about these annual adjustments. The tax
year 2018 adjustments generally are used on tax returns filed in 2019.
The tax items for tax year 2018 of greatest interest to most taxpayers include
the following dollar amounts:
- The standard deduction for married filing jointly rises
to $13,000 for tax year 2018, up $300 from the prior year. For single
taxpayers and married individuals filing separately, the standard
deduction rises to $6,500 in 2018, up from $6,350 in 2017, and for heads
of households, the standard deduction will be $9,550 for tax year 2018, up
from $9,350 for tax year 2017.
- The personal exemption for tax year 2018 rises to
$4,150, an increase of $100. The exemption is subject to a phase-out that
begins with adjusted gross incomes of $266,700 ($320,000 for married
couples filing jointly). It phases out completely at $389,200 ($442,500
for married couples filing jointly.)
- For tax year 2018, the 39.6 percent tax rate affects
single taxpayers whose income exceeds $426,700 ($480,050 for married
taxpayers filing jointly), up from $418,400 and $470,700, respectively.
The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the
related income tax thresholds for tax year 2018 are described in the
revenue procedure.
- The limitation for itemized deductions to be claimed on
tax year 2018 returns of individuals begins with incomes of $266,700 or
more ($320,000 for married couples filing jointly).
- The Alternative Minimum Tax exemption amount for tax
year 2018 is $55,400 and begins to phase out at $123,100 ($86,200, for
married couples filing jointly for whom the exemption begins to phase out
at $164,100). The 2017 exemption amount was $54,300 ($84,500 for married
couples filing jointly). For tax year 2018, the 28 percent tax rate
applies to taxpayers with taxable incomes above $191,500 ($95,750 for
married individuals filing separately).
- The tax year 2018 maximum Earned Income Credit amount
is $6,444 for taxpayers filing jointly who have three or more qualifying
children, up from a total of $6,318 for tax year 2017. The revenue
procedure has a table providing maximum credit amounts for other
categories, income thresholds and phase-outs.
- For tax year 2018, the monthly limitation for the
qualified transportation fringe benefit is $260, as is the monthly
limitation for qualified parking,
- For calendar year 2018, the dollar amount used to
determine the penalty for not maintaining minimum essential health coverage
remains as it was for 2017: $695.
- For tax year 2018, participants who have self-only
coverage in a Medical Savings Account, the plan must have an annual
deductible that is not less than $2,300, an increase of $50 from tax year
2017; but not more than $3,450, an increase of $100 from tax year 2017.
For self-only coverage, the maximum out-of-pocket expense amount is
$4,600, up $100 from 2017. For tax year 2018, participants with family
coverage, the floor for the annual deductible is $4,600, up from $4,500 in
2017; however, the deductible cannot be more than $6,850, up $100 from the
limit for tax year 2017. For family coverage, the out-of-pocket expense
limit is $8,400 for tax year 2018, an increase of $150 from tax year 2017.
- For tax year 2018, the adjusted gross income amount
used by joint filers to determine the reduction in the Lifetime Learning
Credit is $114,000, up from $112,000 for tax year 2017.
- For tax year 2018, the foreign earned income exclusion
is $104,100, up from $102,100 for tax year 2017.
- Estates of decedents who die during 2018 have a basic
exclusion amount of $5,600,000, up from a total of $5,490,000 for estates
of decedents who died in 2017.
- The annual exclusion for gifts increased to $15,000, an
increase of $1,000 from the exclusion for tax year 2017.
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