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Inflation (and new tax law) effects on 2018 federal tax deductions, exemptions and itemized limitations

2018 tax rates, income brackets as adjusted by inflation and the new tax laws

Inflation_blackboard
This is the first in a 10-part series on the 2018 tax year inflation adjustments. Links to the other posts are at this end of this article.

When this post was first published, the White House and Congressional Republicans were still hoping to get some tax changes finalized by the end of the year

The IRS, however, isn't waiting didn't wait on Capitol Hill.

The Internal Revenue Service on Thursday, Oct. 19, released its annual compilation of tax provisions that are affected by inflation. It also issued next year's retirement plan contribution changes.

The upshot is that most amounts will increase in 2018. 

Numbers, we've got lots o' numbers: The full extent of most of the inflation adjusted tax changes are covered in Revenue Procedure 2017-58. That document is a full 28 pages long and includes some tax figures that most of us average taxpayers don't really care about.

The pension changes for 2018 that are detailed in IRS Notice 2017-64 take up another three pages.

But even the tax provisions that matter to you, me and every other Joe and Jane Taxpayer, such as just how much income will be what tax brackets and how much we can stash in our 401(k) plans and the standard deduction amounts for the various filing statuses, contain a lot of numbers.

The sheer amount of info is why I'm doing a tax inflation adjustments series, just like I did around this time last year.

And yes, observant readers of the ol' blog, I am using the same graphic for this first of the 2018 tax inflation posts, which like last year's, is a look at next year's income tax rates and brackets.

2018 still has (for now) 7 tax brackets: We been operating with seven tax rates and income brackets for five years now, ever since we backed away from the fiscal cliff.

The GOP's draft tax reform outline, however, would like to cut those tax rates and brackets by more than half, to just three.

Until that happens (if it happens), though, the IRS is preparing to tax our earnings in 2018 at rates that start at 10 percent and go to a maximum 39.6 percent.

UPDATE, Dec. 20, 2017: The House and Senate approved a major tax bill today. (Further update: it was signed into law on Dec. 22, 2017.) The tax changes effective with the 2018 tax year affect many of the inflation adjustments that are part of this series. I have/will make those updates in each post as needed, starting with this one on how the tax rates and brackets will look in 2018.

You can read more about the new tax law in my initial overview of the tax changes, a second look at even more tax law changes, a glimpse at how pass-through entities now will be taxed and when you might expect to see any benefits from the tax changes.

This post has been updated to reflect the new tax rates and income brackets. Under the new law, known as the Tax Cuts and Jobs Act, there still will be seven tax rates, but they are slightly different from what we've been using since 2013. Below, per the popularly known Tax Cuts and Jobs Act, are  what you'll use to figure your 2018 taxes when you file your return in 2019:

NEW 2018 tax rates and income brackets
As enacted by the Tax Cuts and Jobs Act, effective for 2018 tax year.
USE THESE TAX RATES AND INCOME BRACKETS
WHEN FILING YOUR 2018 TAX RETURN IN 2019.

Tax Rate Single  Head of Household Married Filing Jointly
or Surviving Spouse
Married Filing Separately
10%  Up to $9,525   Up to $13,600   Up to $19,050   Up to $9,525
12% $9,526 to $38,700   $13,601 to $51,800   $19,051 to
$77,400
  $9,526 to $38,700
22% $38,701 to $82,500   $51,801 to $82,500   $77,401 to $165,000   $38,701 to $82,500
24% $82,501 to $157,500   $82,501 to $157,500   $165,001 to $315,000   $82,501 to $157,500
32% $157,501 to $200,000   $157,501 to $200,000   $315,001 to $400,000   $157,501 to $200,000
35% $200,001 to $500,000   $200,001 to $500,000   $400,001 to $600,000   $200,001 to $300,000
37% $500,001
or more
  $500,001
 or more
  $600,001
 or more
  $300,001 
 or more

 

And here, just for fun (and because I had already created the table back in October) are the inflation-adjusted rates and income brackets we would have used if the 2018 tax act had not been enacted:

ORIGINAL INFLATION AMOUNTS: 2018 tax rates and income brackets
IRS inflation adjustments issued prior to enactment of the Tax Cuts and Jobs Act.
THIS INFORMATION IS FOR HISTORIC REFERENCE ONLY.
DO NOT USE THESE TAX RATES AND INCOME BRACKETS.

Tax Rate Single  Head of Household Married Filing Jointly
or Surviving Spouse
Married Filing Separately
10%  Up to $9,525   Up to $13,600   Up to $19,050   Up to $9,525
15% $9,526 to $38,700   $13,601 to $51,850   $19,051 to
$77,400
  $9,526 to $38,700
25% $38,701 to $93,700   $51,851 to $133,850   $77,401 to $156,150   $38,701 to $78,075
28% $93,701 to $195,450   $133,851 to $216,700   $156,151 to $237,950   $78,076 to $118,975
33% $195,451 to $424,950   $216,701 to $424,950   $237,951 to $424,950   $118,976 to $212,475
35% $424,951 to $426,700   $424,951 to $453,350   $424,951 to $480,050   $212,476 to $240,025
39.6% $426,701
or more
  $453,351
 or more
  $480,051 
 or more
  $240,026 
 or more

 
The income ranges and at what level they'll be taxed are important as we make tax moves and plans related to the coming 2018 tax year. 

And you'll use these numbers when you file your 2018 tax return in 2019.

However, do not — I repeat, do not — use the above table for filing your 2017 tax return next year.

2017 tax rates and income brackets: To file your 2017 return, which is due by April 17, 2018 (yep, another later deadline since April 15 next year falls on Sunday and Emancipation Day is Monday, April 16), you'll use the 2017 tax rates and income brackets, shown below:

2017 tax rates and income brackets
USE THESE TAX RATES AND INCOME BRACKETS
WHEN FILING YOUR 2017 TAX RETURN DUE APRIL 17, 2018.

Tax Rate Single  Head of Household Married Filing Jointly
or Surviving Spouse
Married Filing Separately
10%  Up to $9,325   Up to $13,350   Up to $18,650   Up to $9,325
15% $9,326 to $37,950   $13,351 to $50,800   $18,651 to
$75,900
  $9,326 to $37,950
25% $37,951 to $91,900   $50,801 to $131,200   $75,901 to $153,100   $37,951 to $76,550
28% $91,901 to $191,650   $131,201 to $212,500   $153,101 to $233,350   $76,551 to $116,675
33% $191,651 to $416,700   $212,501 to $416,700   $233,351 to $416,700   $116,676 to $208,350
35% $416,701 to $418,400   $416,701 to $444,550   $416,701 to $470,700   $208,351 to $235,350
39.6% $418,401
or more
  $444,551
 or more
  $470,701 
 or more
  $235,351 
 or more


If you just haven't had enough tax numbers, you also can check out the ol' blog's special page lets you look back at tax rates and income brackets through the years.

Enjoy the 2017, 2018 and past year tax rate tables. I'll be back with more inflation adjusted tax changes for the 2018 tax year in coming posts.

The directory below, which lists this post first, shows what you can expect in the 2018 tax years thanks to inflation. If these subsequent posts issues are affected by the Tax Cuts and Jobs Act, they will be updated, too, to reflect the new law's changes.

  1. 2018 tax rates and income brackets
  2. Standard deduction amounts, personal exemptions and limitations on itemized deductions and exemptions
  3. Retirement, pension plan contribution limits
  4. Credits and deductions, including adoption costs and assistance, Lifetime Learning Credit, Earned Income Tax Credit, educators' expenses, interest on education loans and transportation fringe benefits
  5. Medical related tax provisions, including contributions to a flexible spending account, health savings account, medical savings account, eligible long-term care premiums and the Affordable Care Act minimal essential coverage penalty
  6. Estate and gift tax limits, kiddie tax
  7. Alternative Minimum Tax exemption amounts and 2018 Social Security wage base
  8. International worker tax issues (foreign income, housing exclusions)
  9. Penalties, for both individuals and tax pros, for things such as failure to file a timely 1040 or certain information returns
  10. Standard mileage deduction amounts (issued separately, and later, by the IRS)

As I get these additional inflation related items posted, I'll put the links in above so this post will serve as an index and directory for the 2018 adjusted amounts. Done!

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Comments

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Kay Bell

Yes, Sal, under the new Tax Cuts and Jobs Act the chained CPI will be used for indexing tax provisions for tax years 2018 through 2025 (or longer is a subsequent Congress extends them). The IRS a couple of weeks ago readjusted some 2018 inflation figures using the chained CPI method; details at http://www.dontmesswithtaxes.com/2018/03/irs-revises-2018-inflation-changes-to-follow-newly-enacted-tax-cuts-and-jobs-act-provisions.html

Sal

Does the standard deduction and income brackets increase EVERY year according to the CPI chained STARTING in 2019. In plain English, will the standard deduction and tax brackets increase over the years according to the CPI chained index?

Kay Bell

Unknown, since the IRS has to wait for Congress to decide what the 2018 rates and brackets under tax reform will be. It's one of the first forms to be updated when that happens, but ...

Jerry

What is the expected release date for the 2018 irs 1040 es form?

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