The Seven Tax Brackets
Yes, this structure will remain the same; however, let’s discuss what these brackets symbolize for you. Tax brackets, also known as marginal tax rates, instruct you as to what tax rate you will be responsible for paying, based on your income. The seven new tax brackets are as follows:
- 10% (Up to $9525 for single filers, up to $19,050 for married filing jointly)
- 12% ($9526-$38,700 for single filers, $19,051-$77,400 for married filing jointly)
- 22% ($38,701-$82,500 for single filers, $77,401-$165,000 for married filing jointly)
- 24% ($82,501-$157,500 for single filers, $165,001-$315,000 for married filing jointly)
- 32% ($157,501-$200,000 for single filers, $315,001-$400,000 for married filing jointly)
- 35% ($200,001-$500,000 for single filers, $400,001-$600,000 for married filing jointly)
- 37% (Over $500,000 for single filers, over $600,000 for married filing jointly)
As you can see, although the seven brackets remained, the rates have decreased. For individuals, these rates will expire in the year 2025, unless they are extended by Congress.
New Standard Deductions
Another aspect that is showing significant change is the standard deduction and exemptions. For married couples filing jointly, the standard deduction jumps from $18,000 to $24,000. For single filers, the standard deduction will increase from $6500 to $12,000. Another area that is seeing change is the child tax care credit. Currently this credit is $1000, but will increase to $2000 this year.
Itemized Deduction Changes
Changes are also in effect for itemized deductions. State and local taxes are still itemized; however, there is now a cap of $10,000. Mortgage interest for primary and secondary residences remains deductible, but the limit has changed from up to $1 million to $750,000. And medical expenses remain deductible; however, this has also changed. Previously, the amount could not exceed 10% of a person’s income, but has changed to 7.5%.
How to Prepare for Tax Season 2018
Although it seems like a lot of changes have been made, normal preparation is key to achieving maximum refunds and minimizing your tax liability. Be sure to stay organized, keep copies of invoices and receipts for tax deduction purposes and don’t be afraid to ask for help. It’s important to be accurate to avoid consequences, such as an audit by the IRS.
The tax pros at Bodine Perry are ready to help you with your income tax responsibilities. Call (855) 851-8318 or visit www.bodineperry.com to learn about all of the services that the professionals offer, and have peace of mind knowing that you’re taken care of by the experts.