Tax Law Changes for 2018

IRA Contributions
The maximum contribution amount for tax year 2017 is $5,500. The catch-up contribution increases to $1,000. Therefore, taxpayers age 50 and older can contribute up to $6,500 (from $6,000).

Filing Status AGI Begin Phaseout AGI Fully Phased Out:
Single (or Married Filing Separately and lived apart from spouse for all of 2017) $62,000 $ 72,000
Married Filing Joint $99,000 – $119,000 ($186,000 if spouse is not covered by a pension plan) ($196,000 if spouse is not covered by a pension plan)
Married Filing Separately $0 – $10,000
Head of Household $62,000 – $ 72,000
Qualifying Widow(er) $99,000 – $119,000

EDUCATION CREDITS
Education Credit 
The maximum Hope Credit is $2,500 per eligible student. The maximum Lifetime Learning Credit remains $2,000 per tax return.

The phase-out range for the Lifetime Learning Credits is $112,000 – $132,000 if married filing jointly and $56,000 – $66,000 for all other filing statuses. The phase-out range for the Hope credit is $160,000 – $180,000 (MFJ) and $80,000 – $90,000 for all other filing statuses.

Lifetime Learning adjusted gross income phaseout:
Refundable American Opportunity
Married Filing Jointly $112,000 to $132,000 $160,000 to $180,000
All other filing statuses $ 56,000 to $ 66,000 $ 80,000 to $ 90,000

Qualified Adoption Expenses 
The maximum adoption credit is $13,570. The credit is phased out for taxpayers with modified adjusted gross income (MAGI) beginning at $203,540, and is completely phased out at MAGI of $243,540. The credit is NOT refundable. The credit for a special needs child is allowed for the year in which the adoption becomes final. No credit for a special needs child is allowed until the adoption becomes final.

Adoption Credit Maximum credit for a child with special needs $ 13,570 Other adoptions, qualified expenses Up to $ 13,570 Phaseout range, modified adjusted gross income $ 203,540 – $ 243,540

Social Security and Medicare Wage base 
Only the social security tax has a wage base limit. The wage base limit is the maximum wage that is subject to the tax for that year. For earnings in 2017, this base is $127,200 wage and $7,886 tax withheld. There is no wage base limit for Medicare tax. All covered wages are subject to Medicare tax.

FICA (SS & Medicare) Wage Base Social Security wage base $ 127,200 Maximum Social Security tax $ 7,886 Medicare Wage Base No ceiling Maximum Medicare Wage tax No ceiling

Child Tax Credit
2017 Tax Year Child Tax Credit amount will remain at $1000.00 per child under age 17.  Refundable to extent 10% of taxpayer’s earned income in excess of $3,000 up to the per child credit amount, if total tax liability, minus nonrefundable credits taken.

Income Tax Rates 
The income tax rates remain 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. (Tax Rates will change for 2018 Tax Year)

Earned Income Credit 
**Qualified dependent must be under age 19 or under age 24 if full time student.

Amount of credit increased. 
The maximum amount of the credit has increased. The most you can get is:

  1. $3,400 if you have one qualifying child,
  2. $5,616 if you have more than one qualifying child
  3. $6,318 if you have more than two qualifying children, or
  4. $510 if you do not have a qualifying child (must be 25 or older).

Earned income amount increased. The maximum amount of income you can earn and still get the credit has increased for 2013. You may be able to take the credit if:

  • You have more than one qualifying child and you earn less than $39,617 ($45,207 if married filing jointly),
  • You have two qualifying children and you earn less than $45,007 ($50,597 if married filing jointly)
  • You have three qualifying children and you earn less than $48,340 ($53,930), or
  • You do not have a qualifying child and you earn less than $15,010 ($20,600 if married filing jointly).

The maximum amount of adjusted gross income (AGI) you can have and still get the credit also has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you.

No of Children Max Credit Maximum Income MFJ
0 $510 $15,010 $20,600
1 $3,400 $39,617 $45,207
2 $5,616 $45,007 $50,597
3 $6,318 $48,340 $53,930

E-file ruling for corporations 
E-file and preparation of Forms 1120 and 1120S corporate returns, as well as 1065 partnership returns are due by March 15th.

**TAX RATES FOR CORPORATIONS WILL CHANGE FOR THE 2018 TAX YEAR!!!

Child and Dependent Care (Daycare)
*Amount is 35% of total qualifying expenses
*Only $3,000 of total qualifying expenses is deductible
*Daycare credit is given for children under age 13

New Standard Deduction 

Filing Status 2014 2013 2016 2017
Single $6,200 $6,100 $6,300 $6,350
Head of Household $8,950 $8,950 $9,300 $9,350
Married Filing Joint $12,200 $12,200 $12,600 $12,700
Widow w/ Dependent $12,200 $12,200 $12,600 $12,700
Married Filing Separate $6,200 $6,100 $6,300 $6,350

New exemption amount

2014 2013 2016 2017
$3,900 $3,950 $4,050 $4,050

Deductible Mileage 

Year Business Charity & Volunteer Medical & Moving
2017 53.5 0.14 .17

Foreign Earned Income Inclusion
If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction.

If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is adjusted annually for inflation, 2017 Max exclusion is $102,100.  In addition, you can exclude or deduct certain foreign housing amounts.

Itemized Deductions 
**There will be MAJOR Changes to itemized deduction law starting in the 2018 Tax Year with the “NEW TAX BILL!!!”

Student Loan Interest 
The maximum deduction for interest paid on qualified student loans is $2,500 and begins to phase out at AGI of $65,000 to $80,000 (S, HOH) and $135,000 to $165,000 (MFJ). MFS does not qualify.

401(K) CONTRIBUTION LIMITS 
2017 Maximum deferral $18,000 2017 Catch Up Contributions for taxpayers 50 and over $ 24,000

IMPORTANT UPDATES

The first day to electronically file you tax returns stated by the IRS is January 27th, 2020 (you can still process your tax returns prior to that date).

If you are claiming the “Earned Income Credit” and the “Additional Child Tax Credit”, returns won’t be processed until February 15th, 2020 and most refund deposits won’t be available until February 27th, 2020 or beyond.

Most changes to the “New Tax Law Bill” will take effect starting January 1st, 2020 for the 2019 tax year!!!

Tax Law Changes for 2019(here)

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