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IRS Confirms Inflation Adjustments For 2018

by Mike Godfrey, Tax-News.com, Washington

27 October 2017


The Internal Revenue Service (IRS) has announced annual inflation adjustments for 2018 covering over 50 tax provisions, including tax rate schedules, for use on tax returns filed in 2019.

Tax items for tax year 2018 of key interest include the following:

  • The standard deduction for married filing jointly rises to USD13,000 for tax year 2018, up USD300 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to USD6,500 in 2018, up from USD6,350 in 2017, and for heads of households, the standard deduction will be USD9,550 for tax year 2018, up from USD9,350 for tax year 2017.
  • The personal exemption for tax year 2018 rises to USD4,150, an increase of USD100. The exemption is subject to a phase-out that begins with adjusted gross incomes of USD266,700 (USD320,000 for married couples filing jointly). It phases out completely at USD389,200 (USD442,500 for married couples filing jointly.)
  • For tax year 2018, the 39.6 percent tax rate affects single taxpayers whose income exceeds USD426,700 (USD480,050 for married taxpayers filing jointly), up from USD418,400 and USD470,700, respectively.
  • The limitation for itemized deductions to be claimed on tax year 2018 returns of individuals begins with incomes of USD266,700 or more (USD320,000 for married couples filing jointly).
  • The Alternative Minimum Tax exemption amount for tax year 2018 is USD55,400 and begins to phase out at USD123,100 (USD86,200, for married couples filing jointly for whom the exemption begins to phase out at USD164,100). The 2017 exemption amount was USD54,300 (USD84,500 for married couples filing jointly). For tax year 2018, the 28 percent tax rate applies to taxpayers with taxable incomes above USD191,500 (USD95,750 for married individuals filing separately).
  • The tax year 2018 maximum Earned Income Credit amount is USD6,444 for taxpayers filing jointly who have three or more qualifying children, up from a total of USD6,318 for tax year 2017.
  • For tax year 2018, the monthly limitation for the qualified transportation fringe benefit is USD260, 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: USD695.
  • 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 USD2,300, an increase of USD50 from tax year 2017; but not more than USD3,450, an increase of USD100 from tax year 2017. For self-only coverage, the maximum out-of-pocket expense amount is USD4,600, up USD100 from 2017. For tax year 2018, participants with family coverage, the floor for the annual deductible is USD4,600, up from USD4,500 in 2017; however, the deductible cannot be more than USD6,850, up USD100 from the limit for tax year 2017. For family coverage, the out-of-pocket expense limit is USD8,400 for tax year 2018, an increase of USD150 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 USD114,000, up from USD112,000 for tax year 2017.
  • For tax year 2018, the foreign earned income exclusion is USD104,100, up from USD102,100 for tax year 2017.
  • Estates of decedents who die during 2018 have a basic exclusion amount of USD5,600,000, up from a total of USD5,490,000 for estates of decedents who died in 2017.
  • The annual exclusion for gifts increases to USD15,000, up by USD1,000 from the exclusion for tax year 2017.

TAGS: individuals | tax | interest | Internal Revenue Service (IRS) | United States | inflation | Tax

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