Each tax season brings changes about which you may have questions and concerns. You wonder if these new rules will cause you to owe more money or get a bigger refund.
The upcoming 2018 tax season looks to be no different in terms of the changes that await taxpayers. You can prepare now for filing your returns and paying taxes by learning about the newest changes that will take effect after the turn of the year.
Tax Bracket Changes
All of the tax brackets will undergo slight but noticeable changes in the new tax season. The taxable income limit of every bracket will increase by two percent to allow for inflation.
To give an example, the 10 percent tax bracket for single filers will see a taxable income increase to $9525. The same bracket for married filing jointly taxpayers will increase to $19,050.
Likewise, single filers whose taxable incomes max at $38,700 will file in the 15 percent tax bracket. Married filing joint taxpayers in the 15 percent bracket will need to have taxable incomes no higher than $77,400.
These increases are up two percent from the 2017 tax filing season. You can prepare now by discovering into what tax bracket your own income will fall when you submit your returns.
Personal Exemption Increase
Another slight but noticeable change that will affect taxpayers in the 2018 tax season is the personal exemption increase. In 2018, it will rise to $4150.This increase will likewise affect the phase-out limits for some taxpayers. The AGI phase-out for single filers will start at $266,700 and end at $389,200.
For married filing jointly taxpayers, that amount starts at $320,000 and ends at $442,500. These limits are an increase of $5200 and $6200 respectively from the 2017 tax filing season.
Standard Deduction Increase
For people who do not itemize their tax returns, they can look forward to an increase in the standard deduction. Permitting that they earn the same amount of money and are entitled to the same credits and exemptions as last year, these individuals can expect to pay less in federal taxes.The standard deduction is expected to rise to:
- $6500 for single filers
- $13,000 for people married filing jointly
- $9550 for head of household filers
- $6500 for people married filing separately
401k Contribution Increases
The tax changes for the 2018 tax filing season will make it easier for people to save for retirement. If you work for a company that offers an employer-sponsored 401k account, you can contribute up to $500 more to it if you are under the age of 50. The IRS will permit you to contribute up to $18,500 to this account before you are taxed.
If you are age 50 or older, you likewise can save up to $500 more in your 401k. Your taxable limit increases to $24,500. These increases are designed to help taxpayers save more money to use later when they retire.
Earned Income Tax Credit Increase
The earned income tax credit is one of the most popular tax credits that the IRS offers to low-income taxpayers. While last year people who were eligible for this credit received $6318 for up to three children, this year taxpayers will receive up to $6444.This credit can be claimed by people who are required to file taxes as well as people who are not required to submit tax returns. Because of the increase, the IRS will take extra measures to protect taxpayers who claim the EITC from fraud. Your tax return may take longer to process if you plan to claim the EITC in the 2018 tax season.
The 2018 tax season will usher in changes that may or may not impact your tax returns. You can gather documents, set aside money, or prepare to take advantage of credits and exemptions by learning what new laws await taxpayers.
