It seems that the GOP has committed itself to a final tax bill. It is not over yet, but it is close enough that an article on the new income tax rates for 2018 makes sense.
The bill, which represents a significant tax reform, changes significant changes in federal income tax brackets and deductions. Let’s take a look at both, starting with the income tax rates for the year 2018.
Income Tax Brackets for 2018
|Rate||Individuals||Married Filing Jointly|
|10%||Up to $9,525||Up to $19,050|
|12%||$9,526 to $38,700||$19,051 to $77,400|
|22%||$38,701 to $82,500||$77,401 to $165,000|
|24%||$82,501 to $157,500||$165,001 to $315,000|
|32%||$157,501 to $200,000||$315,001 to $400,000|
|35%||$200,001 to $500,000||$400,001 to $600,000|
|37%||over $500,000||over $600,000|
The number of brackets remained the same at seven. Rates overall, however, have come down. For individuals, these lower rates are scheduled to expire in 2025 unless Congress extends them.
The top rate will fall from 39.6% to 37%. The bottom rate remains at 10%, but it covers twice the amount of income compared to the previous brackets.
Standard Deduction and Exemptions for 2018
The new tax rules also make big changes to the standard deduction and exemptions.
The standard deduction in 2018 as the law currently exists is $13,000 for a couple filing jointly. That number will jump to $24,000. For single filers, it jumps from $6,500 to $12,000.
The personal exemption, currently at $4,150 for 2018, would be repealed. That’s the bad news. The good news the child tax credit gets a big boost.
It currently stands at $ 1,000 and starts phasing out $ 110,000 in income for couples and $ 75,000 in income for everyone else. Under the new law, the loan will double to $ 2,000, of which $ 1,400 will be a refundable tax credit. Also, it does not start to pay up to $ 400,000 income for couples and $ 200,000 for singles.
Itemized Deductions for 2018
Several key changes are coming for itemized deductions. State and local taxes can still be itemized, but they are now capped at $10,000. This concession attempts to address the uproar from states that levy big taxes on their citizens.
Interest on mortgages for primary and secondary residences is still deductible. The limit, however, has come down from loans up to $1 million to loans up to $750,000.
Medical expenses in 2017 and 2018 are deductible to the extent they exceed 7.5% of income (down from 10%).