As an accountant, CPA, or another tax preparer, MoneyThumb wants you to be aware of the latest 2018 changes to tax rates, standard deductions, exemption amounts and more. This article from Forbes author Kelly Phillips Erb explains in great detail every single change that can affect your clients and their income tax returns for the year 2018.
For your reading convenience, we have included the first portion of the article and a few highlights below:
"The Internal Revenue Service (IRS) has (finally) announced a number of tax-related provisions for 2018, including, of course, the latest tax tables. These changes are due to the Tax Jobs and Cuts Act of 2017, signed into law by President Trump on December 22, 2017. The Internal Revenue Bulletin (IRB): 2018-10 dated March 5, 2018, confirms the new numbers. Changes of note include those to the EITC, adoption credit, and more. These are the numbers for the tax year 2018 beginning January 1, 2018. They are not the numbers and tables that you’ll use to prepare your 2017 tax returns in 2018.
Smart tax preparers will bookmark this blog post for future reference. It will make your job easier when the time comes to prepare your clients 2018 income tax returns. The article from Forbes breaks down each tax bracket with appropriate rates. One important change is the amount of standard deduction. It will increase to $12,000 for individuals, $18,000 for heads of household, and $24,000 for married couples filing jointly and surviving spouses.
A few more highlights from the Forbes article include the following:
Some additional tax credits and deductions were adjusted for 2018 or altered under the conference bill. Here's a look at a few of the most popular:
- Child Tax Credit. The child tax credit has been expanded to $2,000 per qualifying child and is refundable up to $1,400, subject to phaseouts. The bill also includes a temporary $500 nonrefundable credit for other qualifying dependents. Phaseouts, which are not indexed for inflation, will begin with adjusted gross income (AGI) of more than $400,000 for married taxpayers filing jointly and more than $200,000 for all other taxpayers. For specific dollar amounts and more about the expanded CTC, click here.
- Earned Income Tax Credit (EITC). For 2018, the maximum EITC amount available is $6,431 for taxpayers filing jointly who have three or more qualifying children. Income phaseouts apply. For more info, IRB 2018-10 has a table providing maximum credit amounts for other categories, income thresholds, and phaseouts.
- Adoption Credit. For 2018, the credit allowed for an adoption of a child with special needs is $13,810, and the maximum credit allowed for other adoptions is the number of qualified adoption expenses up to $13,810. Phaseouts apply beginning with modified adjusted gross income (MAGI) in excess of $207,140 and completely phased out for taxpayers with MAGI of $247,140 or more.
- Student Loan Interest Deduction. For 2018, the maximum amount that you can deduct for interest paid on student loans remains $2,500. Phaseouts apply for taxpayers with MAGI in excess of $65,000 ($135,000 for joint returns) and are completely phased out for taxpayers with MAGI of $80,000 or more ($165,000 or more for joint returns). The conference bill did not repeal the deduction.
- Foreign Earned Income Exclusion.For tax year 2018, the foreign earned income exclusion is $103,900, up from $102,100 for tax year 2017.
- Medical Savings Accounts (MSA). For 2018, a high-deductible health plan (HDHP) is one that, for participants who have self-only coverage in an MSA, has an annual deductible that is not less than $2,300 but not more than $3,450; for self-only coverage, the maximum out-of-pocket expense amount is $4,550. For 2018, HDHP means, for participants with family coverage, an annual deductible that is not less than $4,550 but not more than $6,850; for family coverage, the maximum out-of-pocket expense is $8,400.
There is a lot more to the Forbes article on tax changes for 2018. We have covered in this blog post some of the most relevant ones. As your preferred PDF financial file converter provider, MoneyThumb loves keeping our readers abreast of all things involving finances and taxes. As a favor to your accounting peers, take a minute to share this blog post so that they too can keep up with the latest changes to income tax laws and guidelines.
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