The IRS (Internal Revenue Service) has introduced some new policies in 2018, which include living cost changes for pensions and inflation adjustments for specific taxes. These yearly changes arrived as Washington lawmakers were thrashing out a budget that was a precursor to tax reform. In October 2017, President Trump asked Republicans to pass this legislation quickly, to clear the path for his new tax agenda. These are the most notable changes:
Workers who take part in some retirement programs ‒ 403(b)s, 457 plans, Thrift Savings and 401(k)s -- can contribute up to $18.5k, which is $500 more than the previous limit of $18k.
There will be bigger income ranges for people who contribute to IRAs, following adjustments to the cost of living. Be aware that these deductions phase out for people and their partners who have workplace pension plans.
Married couples will be subject to a varying phase-out range, based on whether the person contributing to the IRA has a workplace pension plan. If the spouse who invests has an employer retirement plan, the range falls between $101k and $121k. For people who do not have a pension plan, but who have a wife or husband who does, the range has been increased to $189k to $199k. For married people with workplace pension cover who file returns separately, the phase-out remains unchanged. The range for this is $0 to $10k.
For heads of households and single people, the phase-out of income has been increased to $120k to $135k. For people who are married who file with their spouse, the range increases to $189k to $199k. For married people who file returns separately, the phase-out remains unchanged. The range for this is $0 to $10k.
Married people who file jointly will receive a deduction of $13k, which is an increase of $300 from the previous figure of $12.7k. Taxpayers who are single, and married taxpayers who file separately, get their standard deductions increased to $6.5k. Heads of households will receive a deduction of $9.55k.
This will be set at $4.15k, which represents an increase of $100. This exemption will have a phase-out beginning at an income of $266.7k, or $320k for married people who file together. It phases out entirely at $389.2k for individuals, and at $442.5k for couples filing together.
The tax rate of 39.6 percent will affect people who earn more than $426.7k. The rate applies to married couples who file together who earn over $480.05k.
Before AMT becomes applicable, $55.4k will be the exemption amount. This starts phasing out at $123.1k. For married people who file together, the amount is $86.2k, and this will start phasing out at $164.1k.
For people who died in 2018, $5.6 million will be the exclusion amount for their estates. This has increased from the amount permitted in 2017 of $5.49 million.
The Lone Star Tax Group can prepare all types of tax returns, including Corporate C and S, 1040 personal, Trust returns, Partnerships and other federal documents, along with Multi-State, Rita, City, State and local. Contact them today at (806) 300-8903.
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