Dependent-related Tax Updates:
• Earned Income Tax Credit (EITC)
For 2018, the maximum EITC amount available is $519 with no children, $3,461 with one child; $5,716 with two children; $6,431 with three or more children.
Phaseouts begin at $15,270 for single taxpayers with no children and end at $54,884 for married filing jointly taxpayers with three or more children.
• Child Tax Credit
For 2018, this credit is increased to $2,000 per qualifying child under 17. A $500 credit is now available for all other dependents.
• Additional Child Tax Credit
For 2018, this refundable portion of the Child Tax Credit is up to $1,400 per qualifying child under the age of 17.
• Kiddie Tax
For 2018, the threshold for the kiddie tax – meaning the amount of unearned income before taxation at the estate/trusts rate – is $2,100.
Unearned income between $1,050-$2,100 is taxed at the child's tax rate of 10%. Unearned income below $1,050 is not subject to tax.
• Adoption Credit
For 2018, the credit allowed for an adoption of a child with special needs is $13,810. The maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,810.
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Current Tax News
General Tax Updates/News:
• Moving Expenses
Moving expenses are now only deductible for military. Any employer payments or reimbursements will be taxable.
• Net Investment Income TaxTaxpayers may be subject to the net investment income tax (NIIT) — a 3.8% tax on the lesser of net investment income or the excess of MAGI over $250,000 ($200,000 if single or head of household, $125,000 if married filing separately). The NIIT does not apply to nonresident aliens.• Alternative Minimum Tax (AMT) Exemption AmountsThe AMT exemption has increased to $70,300 for individuals, and $109,400 for married couples.
• American Opportunity Tax Credit
The American Opportunity Tax Credit provides a maximum credit of $2,500 per eligible student.
The credit applies ONLY to four years of a student’s undergraduate education, and up to $1,000 of said credit is refundable.
• Advantages for Small Businesses
Certain qualifying property purchased and placed into service after 9/27/17 and before 1/1/2023, may use the new 100% bonus depreciation rate.
Rates for Tax Year 2018
There is NO personal exemption for 2018.
Standard Deduction Rates:
$24,000 for married taxpayers filing jointly
$18,000 for head of household
$12,000 for single taxpayers
$12,000 for married taxpayers filing separate.
The additional standard deduction amount for the aged (65 or older) or the blind is $1,300; that amount is increased to $1,600 if the taxpayer is single or head of household, and not a surviving spouse.
Standard Mileage Rates:
Business: 54.5 cents
Medical/Moving: 18 cents
Charitable: 14 cents
2018 Income Tax Brackets
There are 7 tax brackets for federal income tax:
10%, 12%, 22%, 24%, 32%, 35%, and 37%
The amount of tax you owe is based on your filing status and income level.
The Tax Cuts and Jobs Act (HR 1, “TCJA”), enacted by Congress in December 2017, eliminates the individual health insurance mandate under the Affordable Care Act (popularly called Obamacare).
However, this provision doesn't take effect
If you did NOT get medical coverage in 2018 you will have to pay the higher of these two amounts when you file your 2018 tax return:
•2.5% of your yearly household income. The maximum penalty is the national average premium for a bronze plan.
•$695 per adult for the year ($347.50 per child under 18). The maximum monthly penalty per family using this method is $2,085.
Social Security Tax Updates:
• Social Security AND Medicare combined withholding rate is: 7.65% for Employees
15.3% for Self-Employed
The maximum taxable earnings for Social Security wage limit of $128,400. There is no earnings limit for Medicare.
Changes to Itemized Deductions:
• Limitation on Itemized Deductions.Limitation for itemized deductions is suspended for years 2018-2025.• Medical and Dental Expenses.Taxpayers can deduct only the part of their medical and dental expenses that exceeds 7.5% of the amount on line 7. This deduction does not apply to nonresident aliens.• Home Mortgage InterestFor acquisition indebtedness incurred as of 12/15/17 or later, the home mortgage interest deduction is limited to the first $750,000 of home loans combined.
For mortgages before 12/15/17, interest is limited to the first $1,000,000 of home loans combined
For tax years following 2018, interest on home equity indebtedness is only deductible if used to buy, build, or improve the mortgaged home.
• Casualty and Theft Losses
As of 2018, the only casualty and theft losses allowed are those incurred due to a federally declared disaster.
• Miscellaneous Deductions
The 2% miscellaneous deductions are no longer allowed. These include unreimbursed employee expenses (travel, job education, union dues, etc.), tax preparation fees, and other expenses (investment, safe deposit box, etc.)
• Charitable Deductions
The limit for charitable deductions has increased to 60% of the taxpayer's AGI.
• State and Local Taxes
The combined amount is now limited to $10,000.
**Beginning 2018, individuals with "seriously delinquent tax debt" (greater than $59,000, liens, and/or evasion) may have their passports revoked, or applications denied.**