Last, but not least, the maximum taxable earnings cap associated with Social Security's payroll tax is rising once again. The increase will affect about one out of 10 working Americans.
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In 2017, all earned income between $0.01 and $127,200 was subject to Social Security's 12.4% payroll tax, with income above and beyond $127,200 not subject to the tax. Next year, this earnings cap will be increasing by $1,500 to $128,700. That means well-to-do folks could owe up to $93 or $186 in additional payroll taxes. The difference will depend on whether they're employed by someone else, which would mean their employer covers half of the 12.4% payroll tax, or if they're self-employed and responsible for all 12.4% of the tax.
The $6,318 tax bonus millions of Americans completely overlook
Taxes can be confusing and downright miserable. But a handful of "tax tricks" could help millions of Americans save thousands of dollars. That's free money you could be leaving on the table. For example: the IRS believes that a full 20% of eligible Americans miss out on a tax break worth up to $6,318... each year!
THE ANNUAL GIFT EXCLUSION ROSE BY A SIZABLE AMOUNT
Passing money along to friends and family is about to get a little bit easier. In 2017, you could gift up to $14,000 to any person without creating any individual tax liability. This is known as the "gift exclusion." In 2018, up to $15,000 can be given as a gift to any person without triggering any tax implications. That's a $1,000, or 7.1%, increase.
It's also worth mentioning that the estate tax exemption increased. In 2018, you'll be able to leave up to $5.6 million without having the estate tax kick in. That's up from a $5.49 million basic exclusion in 2017.
THE ALTERNATIVE MINIMUM TAX EXEMPTION AMOUNTS RISE ON PAR WITH INFLATION
Most Americans might not be familiar with the alternative minimum tax, or AMT, but it's designed to ensure that wealthier Americans pay their fair share of taxes given the copious number of deductions and credits available.
Next year, the income exemption limits tied to the AMT will be rising once more, since the AMT is now permanently tethered to the inflation rate. In 2018, the income exemption threshold rises to $55,400, up from $54,300 in 2017 for single filers. Married couples filing jointly will see ther income exemption rise to $86,200 in 2018 from $84,500 this year. The AMT begins to phase-out for single filers at $123,100 in 2018, and $164,100 for married couples.
MINOR UPDATE TO THE TAX BRACKETS
The change that most Americans are interested in is the one that'll most directly affect their paycheck: the 2018 tax schedule. As expected, inflation left its impact on the 2018 tax brackets, with the income ranges for each bracket increasing by right around 2%.
That would suggest that any salaried employees who didn't receive a raise are likely to owe a bit less in federal taxable income in 2018, deductions and credits being equal, than they did in 2017.
It's also worth pointing out that the 2018 tax schedule affects your earnings in 2018 and will have nothing to do with the taxes you prepare for your 2017 earnings early next year.
Curious to see how things changed? Here's a quick comparison of the 2017 tax schedule:
A BOOST IN THE PERSONAL-EXEMPTION ALLOWANCE
On the other hand, those of you who do itemize are also getting a boost. The personal-exemption allowance is rising by $100 in 2018, to $4,150 from $4,050 in 2017.
Personal exemptions are particularly popular among wealthier taxpayers, meaning the phase-out income limits and complete exemption increases for 2018 are important to know. In 2017, phase-outs for the personal exemption began at adjusted gross incomes (AGIs) of $261,500 for single filers and $313,800 for married filers, while ending completely at $384,000 for single filers and $436,300 for married couples.
Next year, these phase-outs increase to AGIs of $266,700 for single filers and $320,000 for married filing jointly, and they end completely at $389,200 for single filers and $442,500 for married filing jointly. In other words, the rich have a little extra wiggle room in 2018 for claiming a personal exemption.
GET TAX RELIEF HELP TODAY
If you think that you may qualify for a penalty waiver, you may want to partner with a reputable tax relief company who can help you make the best case to the IRS. Advance Tax Relief helps many individuals just like you work with the IRS to solve a wide variety of issues, including penalty waivers. Call our team today at 800-790-8574 for more information. For a free consultation, schedule an appointment with us online.
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