New Tax Numbers for 2018

September 19, 2017

Author: Constance D. Smith

The new Projected 2018 Inflation Adjusted Tax numbers have just been computed based on the average 12 months CPI (Consumer Price Index) ending August 31, 2017. For taxpayers considering any year end tax planning, knowing the changes for next year might be important, so here’s a partial list that could affect individuals and small business owners:

 

ESTATE AND GIFT TAXES:

  • The Estate Tax exemption amount (applicable exclusion amount) and the gift tax exclusion amount for 2018 are increased to $5.6 million per person for life.
  • Annual gift tax exclusion amount for 2018 has finally been increased to $15,000 per donor, per recipient per year.
  • Generation Skipping Transfer Tax exemption is increased to $5.6 million, but is in addition to the unified estate and gift taxes.
  • Annual gift exclusion to noncitizen spouses has increased to $152,000 per year (not unlimited if your spouse isn’t  a citizen)
  • Gifts from nonresident noncitizens remains at $100,000/year to avoid reporting. This includes inheritances from abroad.
  • Expatriation tax applies to a US Citizen who averaged more than $165,000/year for the five years prior to surrendering their U.S. citizenship and requires them to pay capital gains taxes on all of their assets, reduced by a $713,000 exemption in 2018.

INCOME TAXES:

  • Standard deduction  remains the same, but the additional standard deduction for over 65 or blind taxpayers is increased $50 to $1300 for married taxpayers and $1600 for single or head of household taxpayers. The standard deduction for dependents is unchanged at $1,050.
  • Personal exemptions will increase $100 to $4150 per person, with increased phase out thresholds for joint filers with AGI over $320,000, Head of Household filers with AGI over $293,350 and Single filers with AGI  exceeding $266,700. These phase out amounts are increased by more than $5,000 higher than 2017.
  • Itemized deductions will be phased out in 2018 starting at AGI of $320,000 for joint filers, $293,350 for head of household and at $266,700 for single filers.
  • The Kiddie tax exemption and reporting thresholds don’t change for 2018
  • Qualified Transportation benefit for parking or transit passes increases to $260/month in 2018.
  • The Adoption Credit increases to $13,840 and is phased out for adopting parents with AGI between $207,580 and $247,580. Employers can also provide a non-taxed benefit of $13,840 to an adopting employee.
  • Student Loan interest deduction phases out  for jointly filing taxpayers with AGI between $135,000 and $165,000, or for single filers with AGI between $65,000 and $80,000 (no change from 2017)
  • IRA contributions are deductible for taxpayers with AGI less than $101,000 if filing jointly, and under $63,000 for single and head of household filers.  Joint filers where one spouse is an active plan participant but the other spouse is not, doesn’t hit the deduction limitation until AGI exceeds $189,000. Maximum IRA contribution hasn’t changed from $5,500/year with $1,000 makeup if over 50 years old.
  • Roth IRA contributions will not be allowed if joint filers’ AGI exceeds $199,000 or single and head of household filers’ AGI exceeds $135,000.
  • Charitable Deductions de minimis limit is increased to the lesser of $109 or 2% of the donation for a benefit received by the donor  while the donor gets to deduct the full contribution.
  • Foreign earned income exclusion  is increased to $104,100 in 2018.
  • Passport revocation for “seriously delinquent tax debt” can occur if the debt exceeds $51,000 in 2018, a $1,000 increase over 2017

HEALTH CARE:

  • Long Term Care premiums are deductible as medical expenses for higher limits in 2018:

$420    under 40 years old

$780    between 40 and 50 years old

$1,560   between 50 and 60 years old

$4,160   between 60 and 70 years old

$5,200 if over 70 years old

  • Health FSA salary contributions are non-taxable up to an increased limit of $2,500 in 2018
  • Individual Mandate for failure to have a qualified insurance plan hasn’t increased from 2017 and remains at $695 per person.

This Article is published for general information, not to provide specific legal advice. The application of any matter discussed in this article to anyone's particular situation requires knowledge and analysis of the specific facts involved.

Copyright © 2017 Fairfield and Woods, P.C., ALL RIGHTS RESERVED.