The 2017 tax year is behind us, excluding a few extensions, and I am already looking forward to the next season. This year, I was able to demonstrate and help my clients visualize what their 2018 tax season will look like based on their current year’s monetary situation.
I was amazed to confirm that 99% of my clients, whose Adjusted Gross Income (AGI) fluctuated between 40K – 400K+, will save between $500-$5000 for the 2018 tax year.
How? Good question…
Let’s start by listing the changes that are easy to identify:
Standard Deductions and Personal Exemptions
- The standard deduction had doubled for all tax filing statuses.
| Tax Filing Status | Previous Standard Deduction | New Standard Deduction (Set to Take Effect in 2018) |
| Single | 6,500.00 | 12,000.00 |
| Married filing Jointly | 13,000.00 | 24,000.00 |
| Married filing Separately | 6,500.00 | 12,000.00 |
| Head of household | 9,350.00 | 18,000.00 |
| Over 65/Blind S or M | 1,250.00 and 2,500.00 | 1,300.00 and 2,600.00 |
- Personal exemptions will be eradicated. ($4050 X each resident and his/her spouse and dependents)
- Child Tax Credit will increase from $1,000 to $2,000 per child. Although modified AGI will remain a factor in the range phaseout, it will not begin before $200,000.00 ($400,000 if MFJ) through December 31, 2025. The age cut-off remains at 17 (the child must be under 17 at the end of the year for taxpayers to claim the credit).
Capital Gains
- Capital gain rates will remain unchanged, but the bracket determination of the tax on capital gain will be replaced by income thresholds.
| Long Term Capital Gains Tax Rate | Single | Head of Household | Married Filing Separately | Married Filing Jointly |
| 0% | $0-$38,700 | $0-$51,850 | $0-$38,700 | $0-$77,400 |
| 15% | $38,700-$426,700 | $51,850-$453,350 | $38,700-$240,025 | $77,400-$480,050 |
| 20% | $426,700 or more | $453,350 or more | $240,025 or more | $480,050 or more |
- The 3.8% net investment was not repealed and therefore will remain.
Additional Changes
- Alternative Minimum Tax (AMT) phaseout thresholds and the AMT exemptions increased significantly to affect the intended target which is the high earners. Although the tax rates will remain at 26% and 28%, in 2018 the AMT thresholds were raised to $1,000,000 for joint filers and $500,000 to single filers and the exemptions were raised to $109,400 for joint filers and $70,300 to single filers.
- Income Brackets for individual taxpayers were decreased for practically every filer status and income level. However, it is not only the decrease in bracket that will yield advantages to taxpayers, but the income variations in each bracket were extended.
- Itemized and Miscellaneous Deductions:
- Medical expenses will decrease 7.5% of AGI for 2018 but will revert to 10% as of January 2019.
- Property, Sales, and Income taxes will be capped at $10,000.00 (MFS $5,000)
- Interest on mortgage loans below $750,000.00 (MFJ) will remain the same.
- Interest for Home Equity Lines of Credit loans are eradicated.
- Moving expense deduction is eradicated until 2025. However, this deduction is still allowed for active duty military personal.
- Work related expenses that were subject to the 2% of your AGI are eradicated.