2018 Income Tax Brackets: Find Out How The New Tax Plan Affects You

2018 Income Tax Brackets: Find Out How The New Tax Plan Affects You

On Dec 22nd, according to Wall Street Journal, President Trump officially signed the tax bill into law that these changes will go into effect in January 2018. It means it will not impact the 2017 Tax that you will file in April 2018. Based on the new Income Tax Brackets, at its heart is a cut in the corporate tax rate to 21% from 35%. The tax plan also cuts individual rates and aims to simplify the tax code by eliminating some deductions, trimming others, and jettisoning a personal exemption.

About 70% Americans might claim the standard deduction when filing their taxes, and their paychecks will almost increase. In 2019, about 48% of households will receive a tax cut of greater than $500, according to the nonpartisan Joint Committee on Taxation. Even though people do not allow to claim for Personal Exemptions as they did before, the amount of standard deduction increase nearly double time. The big benefits to high-income business owners and heirs to large estates. Middle-income households will get tax cuts that are set to expire, and some households, particularly upper-middle-class residents of high-tax states, would likely pay more than they do now.

The new Federal Income Tax Brackets in 2018 

I would like to share with you the new Federal Income Tax Brackets in 2018 compared with those in 2017 for your reference. Regard to this new change, our Tax Rate reduces compared to 2017.

Here are details of the 2018 Income Tax Brackets 


Personal Exemptions
Based on the new Tax 2018, there will be no personal exemptions for 2018. A personal exemption is a specific amount of money that you can deduct for your tax bill and for each of your dependents.

Standard Deduction


The Standard Deduction is bigger than 2017- $12,000 for single filers and $24,000 for married couples filing jointly. It is a set amount of money that you can reduce your taxable bill from your expense (subtract the total expenses from your incomes). According to IRS, Itemized deductions can include medical expenses, home mortgage loan interest, real estate taxes, charitable donations, unreimbursed employee business expenses, uninsured casualty or theft losses, and more, Your Standard Deduction varies depending on your filing status. For example, if you’re paying off your student’s loans, you may qualify for the student loan interest deduction.

If you are curious how much Standard Deduction you can get, you should visit IRS.gov and use the Interactive Tax Assistant tool to help determine your standard deduction. I have used this tool that is very useful to calculate your Standard Deduction from IRS tool. After going through a couple steps that took me about 1 minute, my Standard Deduction is about $6,300. That’s not bad right:)

Housing-Related Deductions
State and local income and property taxes
The bill caps the deduction for state and local taxes, which includes property tax, plus income or sales taxes.

Mortgage Interest
The bill allows deduction of mortgage interest on loans up to $750,000, but existing larger loans would be grandfathered. Current law allows for deductions on loans up to $1 million.

Other Deductions
Medical expenses
The tax bill lowers the threshold above which medical expenses are deductible, from 10% of income to 7.5% of income, for 2017 and 2018 returns. Starting in 2019, the level goes back up to 10% of income.

Student Loans
The bill makes no changes to deductions for interest paid on student loans.

Charitable Contributions
The bill makes no major changes to deductions for charitable giving.

Alimony
Alimony payments will no longer be deductible for the payer for agreements signed after 2018.

Child-Tax Credit
The tax bill doubles the child-tax credit to $2,000 and raises the income level at which the credit starts phasing out to $400,000 for married couples and $200,000 for others.

Alternative Minimum Tax
The alternative minimum tax on individuals, a parallel tax that disallows personal exemptions and state deductions for high-earning households, is narrowed. As a result, the Tax Policy Center estimates, only 200,000 households will likely pay it instead of 5.2 million.

Estate Tax
Estates over $11.2 million per individual are taxed at 40% in the plan, up from $5.6 million.

 

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Amy Nguyen

Amy Nguyen

I feel happy to share my experiences with you about Travel - Food - Life around the world. I hope to inspire you to Live-Love- Laugh :)

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