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IRS Issues New Tax Tables, Inflation Adjustments for 2018

The IRS has announced the new lower tax brackets for 2018 and also issued inflation-adjusted amounts for many provisions. This is all in response to the Tax Cuts and Jobs Act.

The Act lowered the tax brackets that apply to individual taxpayers beginning in 2018 (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.

The amount of earned income at or above which the maximum amount earned income tax credit is allowed is slightly lower than the amounts previously announced: $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 phaseout amounts are also slightly lower.

The standard deduction for 2018 is $24,000 for married taxpayers filing jointly, $12,000 for single individuals and married taxpayers filing separate returns, and $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; for estates and trusts, it is $24,600.

For 2018, the aggregate cost of any Sec. 179 property that a taxpayer elects to treat as an expense cannot exceed $1 million. Under Sec. 179(b)(2), the $1 million limitation is reduced (but not below zero) by the amount the cost of Sec. 179 property placed in service during 2018 exceeds $2,500,000.

For individuals who pass away 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.

The foreign earned income exclusion under Sec. 911 is $103,900 for 2018. It had been previously announced at $104,100.