Your Family Budget Considering The 2018 Standard Deduction And Tax Rates

The new standard deduction and tax rates go in effect for 2018. The tables are as follows:

Single 2018 Tax Brackets
Taxable Income
Tax Bracket:
$0-$9,525 10%
$9,526-$38,700 12%
$38,701-$82,500 22%
$82,501-$157,500 24%
$157,501-$200,000 32%
$200,001-$500,000 35%
$500,001+ 37%

Married Filing Jointly 2018 Tax Brackets
Taxable Income
Tax Bracket:
$0-$19,050 10%
$19,051-$77,400 12%
$77,401-$165,000 22%
$165,001-$315,000 24%
$315,001-$400,000 32%
$400,001-$600,000 35%
$600,001+ 37%

Head of Household 2018 Tax Brackets
Taxable Income
Tax Bracket:
$0-$13,600 10%
$13,601-$51,800 12%
$51,801-$82,500 22%
$82,501-$157,500 24%
$157,501-$200,000 32%
$200,001-$500,000 35%
$500,001+ 37%

Married Filing Separately 2018 Tax Brackets
Taxable Income
Marginal Tax Rate:
$0-$9,525 10%
$9,526-$38,700 12%
$38,701-$82,500 22%
$82,501-$157,500 24%
$157,501-$200,000 32%
$200,001-$300,000 35%
$300,001+ 37%

Standard Deduction Amounts
The 2018 standard deduction amounts will be as follows:

Single or married filing separately: $12,000
Married filing jointly: $24,000
Head of household: $18,000
The additional standard deduction for people who have reached age 65 (or who are blind) is $1,300 for each married taxpayer or $1,600 for unmarried taxpayers.

Personal exemptions and dependent exemptions will no longer exist.

Child Tax Credit
The child tax credit is increased from $1,000 per child to $2,000 per child, with the phaseout range not beginning until $200,000 of modified adjusted gross income ($400,000 if married filing jointly). Up to $1,400 of the credit (per child) will be refundable.

Changes to Itemized Deductions
Firstly, with regard to mortgages and home equity loans, only interest related to “acquisition indebtedness” will be deductible. This includes debt related to “acquiring, constructing, or substantially improving” your qualified residence. In other words, the interest on many home equity loans will no longer be deductible.

In addition, for “acquisition indebtedness” taken out 12/16/2017 or later, only interest on the first $750,000 of the balance ($375,000 if married filing separately) will be deductible. For loans taken out on or before 12/15/2017, the old $1,000,000 limit ($500,000 if married filing separately) will apply.

The deduction for state/local/foreign property taxes and income taxes remains in place, as well as the option to deduct state and local sales taxes instead of state and local income taxes in any year. The total deduction, however, will be limited to $10,000 per year ($5,000 if married filing separately).

The deduction for medical expenses will still exist. And for 2017 and 2018, the threshold for deductibility will be 7.5% of adjusted gross income rather than 10%.

Personal casualty losses (e.g., losses due to fire, storm, theft) will no longer be deductible unless they are attributed to a federally declared disaster.

Capital Gains and Qualified Dividends
Long-term capital gains and qualified dividends will still have 0%, 15%, and 20% tax rates. The income thresholds separating those different tax rates, however, have changed. For 2018, long-term capital gains and qualified dividends will face the following tax rates:

0% tax rate if they fall below $77,200 of taxable income if married filing jointly, $51,700 if head of household, or $38,600 if filing as single or married filing separately.
15% tax rate if they fall above the 0% threshold but below $479,000 if married filing jointly, $452,400 if head of household, $425,800 if single, or $239,500 if married filing separately.
20% tax rate if they fall above the 15% threshold.
Note that threshold for the top of the 0% tax rate is close to but not the same as the top of the 12% tax bracket.

After reviewing the changes apply the new standard deduction and the change in amount and the new tax brackets to your personal case and see if you will be better off or if you need to pay an estimated tax to avoid interest and a penalty at tax time.

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