Get out your pencil and paper—the Internal Revenue Service has unveiled some major changes for 2018.
From cost-of-living adjustments for retirement savings to inflation changes for tax provisions, check out the newest laws for the upcoming tax season.
Higher contribution limits for retirement savings: If you’re an employee who participates in a 401(k) or 403(b), you will be allowed to contribute up to $18,500. That’s $500 additional dollars.
Deductible contributions to IRAs: Savers who contribute to individual retirement accounts will have higher income ranges following cost-of-living adjustments. This deduction phases out for individuals and their spouses who are covered by workplace retirement plans. For single taxpayers, the limit will be $63,000 to $73,000.
Contributions to Roth IRAs: For single people or heads of households, the income phase-out has increased to between $120,000 and $199,000. For married couples filing jointly, that number is now $189,000
Standard deductions: The standard deduction for those married and filing jointly will rise to $13,000 from $12,700. Single taxpayers and those who are married and file separately will see their deduction rise to $6,500. The deduction will be $9,550 for heads of households.
Personal exemption: The personal exemption will grow by $100 to $4,150. The phase-out for this exemption begins at an income level of $266,700 for single people or $320,000 for married couples filing jointly. The exemption phases out at $389,200 for individuals and $442,500 for married couples who file jointly.
Alternative Minimum Tax: The exemption amount is $55,400 for individuals prior to the alternative minimum tax kicking in and begins to phase out at $123,100. For married couples who file jointly, that will be $86,200 and will phase out at $164,100.
Estate tax: The basic exclusion amount for estates of decedents who die in 2018 will be $5.6 million, an increase from $5.49 million in 2017.
Stick With The Pros
Thinking of doing your taxes on your own? You may want to think again. Here’s a few reasons to let the pros take over.
Tax preparation fees can be deductible: Any fees you incur while preparing for your taxes can be deducted if the sum of the miscellaneous deductions you are claiming is greater than 2 percent of your adjusted gross income.
Additional deductions or credits: Are you aware of every tax deduction and credit you are eligible for? Probably not. Your friendly neighborhood accountant probably is.
Audit assistance: If you are audited, a tax professional can work with you to organize the necessary paperwork on your behalf.
Avoid mistakes: Professional tax preparers use specialized software to double-check their work.
Sources: cnbc.com, foxbusiness.com