Many contribution
and deduction amounts in the tax law are indexed for inflation. Many also have statutory adjustments. While there remains uncertainty about whether
Congress and the President will enact “Tax Reform” before the end of 2017, some
important 2018 inflation-adjusted figures have been released and are as
follows:
1. The top 39.6%
ordinary income and 20% long-term capital gain tax rates apply when taxable
income exceeds $480,050 for joint filers (up from $470,700 in 2017) and $426,700
for single filers (up from $418,400 in 2017).
For trusts and estates, the top rates apply when taxable income exceeds
$12,700 (up from $12,500 in 2017).
2. Itemized
deductions and personal exemptions begin to “phase-out” once adjusted gross
income exceeds $320,000 for joint filers (up from $313,800 in 2017) and $266,700
for single filers (up from $261,500 in 2017).
These phase-outs do not apply to trusts and estates.
3. The personal
exemption is $4,150 (up from $4,050 in 2017).
4. The contribution
amount for traditional and Roth IRAs remains $5,500 (the same as in 2017). For those who are age 50 and older, the
additional “catch-up” contribution is $1,000 and is not indexed for inflation.
5. The modified
adjusted gross income phase-out range for contributions to Roth IRAs is from
$189,000 to $199,000 for joint filers (up from $186,000 to $196,000 in 2017);
and from $120,000 to $135,000 for single filers (up from $118,000 to $133,000
in 2017).
6. The contribution
amount for traditional and Roth 401(k) accounts increases to $18,500 (up from
$18,000 in 2017). For those who are age
50 and older, the additional “catch-up” contribution remains $6,000 (the same
as in 2017).
7. The limit on the
annual additions to a participant's defined contribution account increases to
$55,000 (up from $54,000 in 2017).
8. The annual
exclusion from gift tax increases to $15,000 per donee (up from $14,000 in 2017).
9. The lifetime
exemption from estate, gift, and generation-skipping transfer taxes increases
to $5,600,000 (up from $5,490,000 in 2017).
10. The Social
Security tax wage base increases to $128,700 (up from $127,200 in 2017).
11. The maximum
annual contribution to a health savings account increases to $3,450 (up from
$3,400 in 2017) for an individual-coverage-only health plan, and $6,900 (up
from $6,750 in 2017) for a family-coverage health plan. For employees age 55 and older, the
additional HSA "catch-up" contribution is $1,000 and is not indexed
for inflation.
