Last week, the IRS announced its 2018 annual inflation adjustments. Below are the highlights for items that changed:

  • Standard deductions:
    • For married filing jointly, increases to $13,000 (up from $12,700 in 2017).
    • For single taxpayers and married individuals filing separately, increases to $6,500 (up from $6,350 in 2017)
    • For heads of households, rises to $9,550 (up from $9,350 for 2017).
  • Personal exemption increases by $100 to $4,150.
    • 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 limitation for itemized deductions to be claimed on tax year 2018 returns of individuals begins with incomes of $266,700 or more ($320,000 for married couples filing jointly).
  • The 39.6 percent tax rate affects single taxpayers whose income exceeds $426,700 ($480,050 for married taxpayers filing jointly), up from $418,400 and $470,700, respectively.
    • The other marginal rates and related income tax thresholds are described in the revenue procedure.
  • The AMT exemption amount rises to $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).
    • The 28 percent tax rate will apply to taxpayers with taxable incomes above $191,500 ($95,750 for married individuals filing separately).
  • Maximum Earned Income Credit amount rises to $6,444 for taxpayers filing jointly who have three or more qualifying children (up from a total of $6,318 in 2017).
  • Estate and Gift Tax:
    • The Federal estate tax exclusion increases to $5,600,000 per person (up from $5,490,000 in 2017).
    • The annual exclusion from gift tax increases to $15,000 per donee (up from $14,000 in 2017).

In addition, cost of living adjustments for pension plans and other retirement plans for 2018 were released. Below are the highlights for items that changed:

  • Contribution limits for 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan increases to $18,500 (up from $18,000 in 2017).
  • Traditional IRA deduction phase-out ranges:
    • For single taxpayers covered by a workplace retirement plan, the phase-out range is $63,000 to $73,000 (up from $62,000 to $72,000).
    • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $101,000 to $121,000 (up from $99,000 to $119,000).
    • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range for the couple’s income is $189,000 to $199,000 (up from $186,000 to $196,000).
    • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • Roth IRA phase-out ranges:
    • For singles and heads of household, $120,000 to $135,000 (up from $118,000 to $133,000).
    • For married couples filing jointly, $189,000 to $199,000 (up from $186,000 to $196,000).
    • The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

 

 

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This information should not be construed as a recommendation, offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The commentary provided is for informational purposes only and should not be relied upon for accounting, legal, or tax advice. While the information is deemed reliable, Wealthspire Advisors, LP cannot guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with regard to the results to be obtained from its use. © 2019 Wealthspire Advisors

Nicole Hart, J.D.

Nicole Hart is head of our trusts & estates department and works in our New York office.