Everyone is talking about the new tax rules for 2018. It’s always a good idea to plan ahead and be prepared where finances are concerned. That’s why we put together a few little-known facts that could benefit you when it’s time to file 2018 taxes.
- The taxable income brackets and long-term capital gains income levels have changed
- There are still seven brackets but the tax rates & income levels have been adjusted, including lowering the top rate from 39.6% to 37%.
- The long-term capital gains preferential rates are the same but the income levels for those rates are different and are based on specific dollar amounts.
- Click here for a great article with details about the new tax brackets and capital gains income level requirements.
- Retirement contributions have changed
- Maximum retirement contributions to 401(k), 403(b), 457(b), and thrift savings plans have increased by $500.
- Maximum retirement contributions to IRAs remain the same – $5,500.
- Catch-up contributions to IRAs and 401(k)s remain the same.
- There is a new non-child tax credit for dependents
- The amount is $500 per dependent.
- This credit could be used for elderly parents or disabled adult children.
- Consult with your tax advisor to see if you meet the qualifications.
- 529 savings accounts can now be used for elementary and secondary school costs
- Up to $10,000 can be distributed annually for K-12 expenses per student.
- This applies to public, private, and religious schools.
- Check out this article for more information on the changes.
- Fewer people will be subject to the Alternative Minimum Tax (AMT)
- The number of tax filers affected by the AMT is expected to drop by more than 95%.
- This does not mean the elimination of the calculation, unfortunately.
- Fewer people will be paying estate taxes
- The federal estate and gift tax exclusion has been doubled to $11 million for single filers and $22 million for joint filers.
- You may not be able to itemize charitable giving
- Because the standard deduction has been increased to $12,000 for single filers and $24,000 for joint filers, fewer people will be itemizing their deductions.
- Some taxpayers may benefit from a tax planning strategy referred to as “bunching” deductions – alternating the standard deduction and itemizing deductions every other year.
- You might consider using a donor-advised fund as an efficient way to strategically gift over time.
APC is happy to answer your questions. We hope you feel informed and prepared for the new changes! If this information sounds like a foreign language to you, we recommend consulting with a tax advisor about your particular circumstances. It would also be helpful to us, (888) 690-1231, to discuss the implications of the new tax law on your long-term goals.
