In Rev. Proc. 2018-18, the IRS announced the new lower tax brackets for 2018 and a number of other new items affected by P.L. 115-97, known as the Tax Cuts and Jobs Act. It also issued inflation-adjusted amounts for many provisions that were unchanged by the Act, other than that the inflation adjustments now must be calculated using the chained consumer price index method, updating the numbers that were originally announced in Rev. Proc. 2017-58.
The tax act lowered the tax brackets that apply to individual taxpayers beginning in 2018 and 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 revenue procedure also contains the figures for taxpayers claiming head-of-household status, unmarried individuals, married taxpayers filing separately, and estates and trusts.
The amount of earned income at or above which the maximum amount of the Sec. 32 earned income tax credit is allowed is slightly lower than the amounts announced in Rev. Proc. 2017-58: $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 IRS also announced new limits on the adoption credit for 2018. Under Sec. 23(a)(3), the credit allowed for an adoption of a child with special needs is $13,810 (this is a change from the previously announced $13,840 amount). The same credit amount is in effect for adopting children other than special-needs children in 2018. The adoption credit begins to phase out under Sec. 23(b)(2)(A) for taxpayers with modified adjusted gross income (MAGI) in excess of $207,140 and is completely phased out for taxpayers with MAGI of $247,140 or more in 2018.
The IRS also announced that 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; and 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 decedents dying 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 announced at $104,100 in Rev. Proc. 2017-58).
— Sally P. Schreiber (Sally.Schreiber@aicpa-cima.com) is a Tax Adviser senior editor.