November 20, 2017
Inflation Adjustments for 2018
The personal exemption will increase to $4,150 for 2018. The standard deduction for single taxpayers and married taxpayers filing separately will be $6,500, and $13,000 for married taxpayers filing joint returns. The standard deduction for heads of household will be $9,550.
Married taxpayers filing joint returns will be subject to the highest bracket of 39.6% with an adjusted gross income (AGI) of $480,050 and single taxpayers on income over $426,700 in 2018.
The limitation above which itemized deductions may be reduced on 2018 individual tax returns begins for single taxpayers with incomes of $266,700 or for married couples filing jointly with incomes of $320,000.
The maximum earned income tax credit amount for 2018 is $6,444 for taxpayers filing jointly who have three or more qualifying children.
The inflation-adjusted unified credit against the estate tax increases to $5.6 million in 2018.
The alternative minimum tax (AMT) exemption amount for 2018 is $86,200 for married taxpayers filing joint returns and $55,400 for single taxpayers. The Sec. 911 foreign earned income exclusion increases to $104,100 for 2018.
For 2018, taxpayers who have self-only coverage in a medical savings account the plan must have an annual deductible that is not less than $2,300 and not more than $3,450. For self-only coverage, the maximum out-of-pocket expense will be $4,600. The annual deductible cannot be less than $4,600 or more than $6,850 for participants with family coverage. The out-of-pocket expense limit for family coverages will be $8,400 in 2018.
The gift tax, child tax credit, lifetime learning credits, adoption credit, deduction for interest on qualified education loans, and many other provisions were adjusted for inflation as well.
Pension Plan Contribution Limits for 2018
The limit on elective deferral for contributions to 401(k) plans, 403(b) plans, most 457 plans, and the federal government’s Thrift Savings Plan will increase to $18,500 for 2018. Even so, the catch-up contribution limit for individuals age 50 and older remains at $6,000.
Most other inflation-adjusted amounts related to pensions plan contributions will also increase in 2018.
The deductible individual retirement arrangement (IRA) contribution for taxpayers covered by a workplace retirement plan phases out for singles and heads of household who have modified AGIs between $63,000 and $73,000. The income phaseout range is from $101,000 to $121,000 in 2018 for married couples filing jointly with a spouse contributing to an IRA covered by a workplace retirement plan. If a taxpayer contributes to an IRA that is not covered by a workplace retirement plan, but is married to someone who is, the deduction is phased out if the couple’s income is between $189,000 and $199,000.
The phaseout range for contributions to Roth IRAs is $189,000 to $199,000 for married couples filing jointly and $120,000 to $135,000 for singles and heads of household.
The AGI limit for the saver’s credit is $63,000 for married couples filing jointly, $47,250 for heads of household, and $31,500 for single taxpayers and for married individuals filing separately.