IRS Releases Annual Inflation Adjustments For Tax Year 2018

IRS Releases Annual Inflation Adjustments For Tax Year 2018

The IRS has released the annual inflation adjustments for tax year 2018 for more than 50 tax provisions.  A full listing of inflation adjustments for tax year 2018 can be found in IRS Revenue Procedure 2017-58.  A summary of the major changes follows:

The standard deduction for married filing jointly increases $300, from $12,700 to $13,000.  For single taxpayers and married individuals filing separately, the standard deduction increases $150, from $6,350 to $6,500.  For heads of households, the standard deduction increases $200, from $9,350 to $9,550.

The personal exemption rises $100, from $4,050 to $4,150.  This exemption is subject to a phase-out that begins with AGI of $266,700 and phasing out completely at $389,200 ($320,000 - $442,500 for married couples filing jointly).

The limitation for itemized deductions to be claimed on 2018 returns will begin with incomes of $266,700 or more ($320,000 or more for married couples filing jointly).

The maximum Earned Income Tax Credit rises $126, from $6,318 to $6,444.

The monthly limitation for the qualified transportation fringe benefit is $260, which is the same as the monthly limitation for qualified parking.

The dollar amount used to determine the penalty for not maintaining minimum essential health coverage remains the same at $695.

For participants who have self-only coverage in a medical savings account, the plan must have an annual deductible that is not less than $2,300, up $50 from tax year 2017, but not more than $3,450, up $100 from tax year 2017.  For self-only coverage, the maximum out of pocket expense amount is up $100, from $4,500 to $4,600.  For participants with family coverage, the floor for the annual deductible is $4,600, up $100 from tax year 2017.  The deductible cannot exceed $6,850, up $100 from tax year 2017.  For family coverage, the out of pocket expense limit is $8,400, an increase of $150 from tax year 2017.

The foreign earned income exclusion increases by $2,000, from $102,100 to $104,100.

Estates of decedents who die during 2018 have a basic exclusion amount of $5.6 million, up $110,000 from tax year 2017.

The annual exclusion for gifts increases to $15,000, up $1,000 from tax year 2017.

In addition, the IRS has also made changes related to retirement plan contributions, summarized below:

Contribution limit for workers enrolled in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan has increased $500, from $18,000 to $18,500.

Phase-out range for taxpayers making contributions to a Roth IRA:

  • Single and Heads of Household: $120,000-$135,000, up $2,000
  • Married filing jointly: $189,000-$199,000, up $3,000
  • Married filing separately: $0-$10,000, no change

Increase in income limit for the Retirement Savings Contributions Credit:

  • Single and Married filing separately: $31,500, up $500
  • Married filing jointly: $63,000, up $1,000
  • Head of household: $47,250, up $650

https://www.irs.gov/pub/irs-drop/rp-17-58.pdf

https://www.accountingtoday.com/news/irs-increases-401-k-retirement-plan...

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