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