A Guide to 2018 Tax Lax Changes (And More) Part I|Financial Accounting Services

Presented by Nicole Albrecht, EA, CTC

The legislation popularly known as the Tax Cuts & Jobs Act did not exactly “rewrite the book” of federal tax laws, but it almost seems that way. On January 1, a host of important, new tax provisions entered the Internal Revenue Code, and others were suddenly repealed.

Due to these reforms, federal tax law has changed to a degree unseen since the 1980s. This guide reviews the major adjustments to the Internal Revenue Code and more:

  • Key tax changes for households
  • Key tax changes for businesses
  • Tax breaks gone in 2018
  • Social Security & Medicare changes
  • COLAs & Phase-Out Range Adjustments
  • Last, but not least, some other, interesting developments

Just a reminder as you read this guide: you should consult with a qualified tax or financial professional before making short-term or long-term changes to your tax or financial strategy.

Key Tax Changes for Households

Whether you file singly, jointly, or as a head of household, you will want to keep these significant alterations to federal tax law in mind. These new tax provisions will remain in place through at least 2025. 

1 Lower income tax rates and adjusted tax brackets.

Thanks to the tax reforms, the seven income tax brackets of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% have been revised to 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The new taxable income thresholds:

Bracket           Single Filers                         Married Filing Jointly             Married Filing                   Head of Household

                                                                       or Qualifying Widower          Separately                        

10%                  $0 – $9,525                           $0 – $19,050                               $0 – $9,525                         $0 – $13,600

12%                  $9,526 – $38,700                $19,051 – $77,400                    $9,526 – $38,700             $13,601 – $51,800

22%                  $38,701 – $82,500             $77,401 – $165,000                  $38,701 – $82,500           $51,801 – $82,500

24%                  $82,501 – $157,500           $165,001 – $315,000               $82,501 – $157,500        $82,501 – $157,500

32%                  $157,501 – $200,000        $315,001 – $400,000               $157,501 – $200,000      $157,001 – $200,000

35%                  $200,001 – $500,000        $400,001 – $600,000               $200,001 – $300,000      $200,001 – $500,000

37%                  $500,001 and up                $600,001 and up                       $300,001 and up             $500,001 and up

The federal government is now using the Chained Consumer Price Index to calculate inflation. That should reduce the size of the yearly adjustments to these brackets.

In scrutinizing all this, you may notice something: the “marriage penalty” applying to combined incomes is nearly gone. That is, the thresholds for joint filers are simply double what they are for single filers for five of the seven brackets. Only married couples in the two uppermost brackets now face the “marriage penalty.”1,2

Continued in Part II