Inflation adjustments and tax tables for 2018 tax returns are issued

The IRS issued the annual inflation adjustments for 2018 for more than 50 tax provisions as well as the 2018 tax rate tables for individuals and estates and trusts (Rev. Proc. 2017-58). These adjusted amounts are used in preparing tax year 2018 returns in 2019.

Most provisions are increasing for inflation in 2018, including 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 2018 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.

The revenue procedure also includes inflation adjustments for the Sec. 24 child tax credit, the Sec. 25A lifetime learning credit, the gift tax, the adoption credit, the Sec. 221 deduction for interest on qualified education loans, and many other provisions.

Tax reform alert: Tax reform legislation enacted in December could affect tax provisions
discussed in this item.