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What’s new in taxes for 2018?

Posted on March 24, 2018

It’s no longer hot news that there are new lower tax brackets for 2018, a part of the Tax Cuts and Jobs Act. So what else has changed, tax wise?

The Teipen team reports that the IRS also issued inflation-adjusted amounts for many provisions that were unchanged by the Act, including: 

    Lowering the tax brackets that apply to individual taxpayers beginning in 2018 and effective through 2025:

       The new rates for married taxpayers filing jointly for 2018 are 10% on income not exceeding $19,050

       12% on income between $19,050 and $77,400

       22% between $77,400 and $165,000

       24% between $165,000 and $315,000

       32% between $315,000 and $400,000

       35% between $400,000 and $600,000; and

       37% on income over $600,000.  

·      Tax credits for or families have also been adjusted:

       $10,180 for taxpayers with one child

       $14,290 for taxpayers with two or more children; and

       $6,780 for taxpayers with no children.

       The corresponding maximum credit amounts and phase-out amounts are also slightly lower.

·      The IRS announced new limits on the adoption credit for 2018. The adoption child credit is $13,810 (this is a change from the previously announced $13,840 amount). The adoption credit begins to phase out under for taxpayers with modified adjusted gross income in excess of $207,140 and is completely phased out for taxpayers earning $247,140 or more.

The IRS also announced standard deductions for 2018:

·      $24,000 for married taxpayers filing jointly:

·      $12,000 for single individuals and married taxpayers filing separate returns

·      $18,000 for heads of household. (After 2018, these amounts will be adjusted for inflation.)

The alternative minimum tax exemption amount for married taxpayers filing jointly is $109,400; for unmarried individuals it is $70,300; and for estates and trusts it is $24,600. If you are unsure how this affects you, just give your CPA a call.

There is also an increase in section 179 depreciation deductions in the year the property is purchased (and the aggregate limit of total purchased property has also been increased.) Additionally, there is a first year bonus depreciation, which can now be used on the purchase of used equipment. Check with your CPA to determine which deduction is best for you.

Estate Tax

For decedents dying in 2018, the basic exclusion amount for determining the unified credit against the estate tax is $11.18 million. This exclusion amount was doubled by the Act and is also subject to inflation adjustments.

Foreign Earned Income

The foreign earned income exclusion under the 2018 Tax Act is $103,900 for 2018.

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Yes, that’s a lot of numbers. How to compute them will take updated knowledge of the new act, and a good understanding of extenuating circumstances. That’s why having a quality CPA firm on your side can make a world of difference to your bottom line.