You haven't even filed your 2017 taxes yet, but the IRS has already announced changes that will affect your 2018 taxes, which you'll be filing in 2019. The changes were announced in Revenue Procedure 2017-58, which runs 28 pages, but below are some key points. How do these changes impact you? Give us a call, and we'll explain how they change your tax situation.
Of course, if any meaningful tax reform is passed, anything can be changed. We'll keep you posted on any developments that affect you.
- The standard deduction for married filing jointly rises to $13,000 for tax year 2018, up $300. 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).
- The bracket changes have not gone up significantly from the previous year. For example, the floor for the 28 percent "married — filing jointly" category is up from $153,101 to $156,151. The details of each bracket are described in the revenue procedure.
- 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, for 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, for 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 $5.6 million, up from a total of $5.49 million 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.