The IRS has released the key tax numbers that are updated annually for inflation, including tax rates, phaseouts, standard deduction, exemption amount, and contribution limits. Since inflation was relatively low in 2017, only small changes have been made in most cases. Note that all of this is subject to change if new tax legislation is passed in 2017 (doubtful) or in 2018, retroactive to 1/1/2018 (I’d give this a 50% chance). Some notable callouts for those who don’t want to read all the way through the update:
· Social Security payments will increase by 2.0% in 2018. The Social Security Wage Base (the max amount of income subject to the 6.2% Social Security Tax) increases from $127,200 to $128,700.
· Max contributions to 401k, 403b, and 457 retirement accounts increases by $500 to $18,500 (+$6000 catch-up if you’re at least age 50).
· Max contribution to a SIMPLE retirement account remains unchanged at $12,500 (+$3000 catch-up if you’re at least age 50).
· Max total contribution to most employer retirement plans (employee + employer contributions) increases from $54,000 to $55,000.
· Max contribution to an IRA remains unchanged at $5,500 (+$1,000 catch-up if you’re at least age 50).
· The phase out for being able to make a Roth IRA contribution is $199k (married) and $135k (single). Phase out begins at $189k (married) and $120k (single).
· The standard deduction increases by $300 to $13,000 (married) and by $150 to $6,550 (single) +$1,300 if you’re at least age 65.
· The personal exemption increases by $100 to $4,150 per family member. Remember that exemption amounts begin to be phased out if your income exceeds $320,000 (married) or $266,700 (single). The exemption is reduced by 2% for every $2500 of AGI over threshold until reduced to $0.
· Itemized deductions are reduced by 3% of the amount AGI is over $320,000 (married) or $266,700 (single).
· The annual gift tax exemption increases by $1,000 to $15,000 per giver per receiver.
· The maximum contribution to a Health Savings Account (HSA) increases to $6,900 (married) and $3,450 (single).
· Standard mileage rates have not been updated yet for 2018.
Note: The key tax numbers linked above are always updated at http://www.perpetualwealthadvisors.com/Resources/Tax2018.htm