Tax items affected by the Tax Cuts and Jobs Act (TCJA) for tax year 2018 of greatest interest to our clients include the following items:
- The standard deduction for married filing jointly rises to $24,000. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,000; for heads of households, $18,000.
- The TCJA eliminated the personal exemption. The personal exemption for tax year 2018 is $0.
- TCJA reduced tax rates for many taxpayers. The new tax rates are: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and a top rate of 37 percent. For tax year 2018, the highest tax rate will apply to married individuals filing jointly and surviving spouses with taxable incomes over $600,000, to single taxpayers and heads of households with incomes over $500,000, and to married taxpayers filing separately with incomes over $300,000.
- The TCJA eliminates the limitation for itemized deductions.
- The Alternative Minimum Tax exemption amount for tax year 2018 is greatly increased under TCJA. For tax year 2018, the exemption amount for single taxpayers is $70,300 and begins to phase out at $500,000, and the exemption amount for married couples filing jointly is $109,400 and begins to phase out at $1 million.
- For estates of any decedent passing away in calendar year 2018, the basic exclusion amount is $11,180,000.
Certain items had minor adjustments.
- For 2018, the foreign earned income exclusion will be $103,900.
- The maximum earned income credit amount will be $6,431 for taxpayers with 3 or more qualifying children, for 2018. Other earned income credit amounts are detailed in Revenue Procedure 2018-18.
- For calendar year 2018, annual contribution limits were adjusted for Health Savings Accounts. For participants with coverage under a high deductible health plan, the annual limitation on contributions for self-only coverage is $3,450 and $6,900 for an individual with family coverage. For calendar year 2018 a high deductible health plan is defined as a health plan with an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,650 for self-only coverage or $13,300 for family coverage. (IRS Rev. Proc 2017-37 and 2018-18 per IRB 2018-10 as amended by IRS Rev. Proc 2018-27)
Items unaffected by the TCJA
The dollar amounts for the following items described in the inflation adjustment news release issued in Oct. 2017 remain unchanged under the new method for adjusting for inflation required by the TCJA:
- For tax year 2018, the annual exclusion for gifts is $15,000.
- For tax year 2018, the monthly limitation for the qualified transportation fringe benefit is $260, as is the monthly limitation for qualified parking.
- For tax year 2018, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $114,000.
- For calendar year 2018, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is $695.
Source: (https://www.irs.gov/newsroom/inflation-adjustments-under-recently-enacted-tax-law) supplemented by DiMarco authors as of May 23, 2018.