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2018 Tax Year Inflation Adjustments Released by IRS

October 25, 2017


The IRS has issued the annual inflation adjustments for the 2018 tax year (to be filed in 2019); see Rev. Proc. 2017-58). 


The personal exemption, which increases from $4,050 in 2017 to $4,150 for 2018. The standard deduction for married taxpayers filing joint returns increases to $13,000, $300 more than in 2017. It also increases slightly for single taxpayers and married taxpayers filing separately to $6,500. The standard deduction increases for heads of household, from $9,350 in 2017 to $9,550 in 2018.


Under the new tax table, the income level at which married taxpayers filing joint returns are subject to the highest bracket of 39.6% increases from $470,700 in 2017 to $480,050 in 2018. Single taxpayers are subject to the 39.6% tax rate on income over $426,700 in 2018, increased from $418,400 in 2017.


The limitation above which itemized deductions may be reduced on 2018 individual tax returns begins for single taxpayers with incomes of $266,700 or for married couples filing jointly with incomes of $320,000.


The maximum earned income tax credit amount for 2017 is $6,444 for taxpayers filing jointly who have three or more qualifying children, up from $6,318 for 2017.


The revenue procedure also contains the inflation-adjusted unified credit against the estate tax, which increases from $5.49 million in 2017 to $5.6 million in 2018.


The alternative minimum tax exemption amount for 2018 is $86,200 for married taxpayers filing joint returns and $55,400 for single taxpayers. The Sec. 911 foreign earned income exclusion increases from $102,100 for 2017 to $104,100 for 2018.


The annual deductible amount for taxpayers who have self-only coverage in a medical savings account also increased slightly. For 2018, the plan must have an annual deductible that is not less than $2,300 and not more than $3,450, increased from not less than $2,250 but not more than $3,350 in 2017. For self-only coverage, the maximum out-of-pocket expense is $4,600, $100 more than for 2017. For tax year 2018 participants with family coverage, the floor for the annual deductible is $4,600, up from $4,500 in 2017. The deductible cannot be more than $6,850, up $100 from the limit for tax year 2017. For family coverage, the out-of-pocket expense limit is $8,400 for 2018 up from $8,250 for tax year 2017.


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