IRS Announces Tax-Related Inflation Adjustments
Recently, the IRS released the annual inflation adjustments for 2018’s tax rate schedules. These adjustments are generally used on returns filed in 2019, so if you have questions about how this information could affect next year’s taxes, please call today to speak with a dedicated tax attorney who can assist you.
Although the IRS disclosed a variety of inflation-related information, there are a few items that have an especially important impact on taxpayers. For example, the standard deduction for filing jointly as a married couple will rise to $13,000 in 2018, which is a $300 increase from this year. Similarly, the standard deduction for taxpayers who file separately will also increase to $6,500. The limit on itemized deductions that can be claimed on 2018 returns has also gone up and so will begin with taxpayers whose incomes exceed or equal $266,700, unless a married couple is filing jointly, in which case the threshold is $320,000.
The Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a refundable credit provided to working individuals with low to moderate incomes who have children. The amount of credit that a family can receive depends on both parents’ gross incomes, as well as the number of children they have. When an income exceeds a certain limit, however, benefits will slowly be phased out. This cut off is referred to as the threshold phaseout amount. The completed phaseout amount, on the other hand, represents the amount of income at which no credit will be given at all. Both the threshold phaseout and the completed phaseout amounts have been adjusted for inflation, as has the maximum amount of credit provided per family. For example, the maximum amount of credit for those with three or more children is $6,444, an increase of $126 from this year.
Foreign Earned Income Exclusion
U.S. citizens and resident aliens who live and work outside of the country are often eligible to receive a foreign earned income exclusion, which when applied, reduces taxable income. This means that although taxpayers are generally taxed on their worldwide income, taxpayers living abroad may be able to exclude income up to a certain amount. This year, the maximum exclusion was set at $102,100. This amount will be increased in 2018 to $104,100.
Estate and Gift Tax Exemptions
Under federal law, decedents can leave a certain amount of their assets to heirs without having to pay either an estate tax or a gift tax. This year, the threshold was set at $5.49 million per individual. Based on inflation rates, this amount will be increased to $5.6 million in 2018. Furthermore, the first $15,000 worth of gifts given to any person will not be included in the amount of taxable gifts made in 2018, which represents an increase of $1,000 from this year’s exclusion.
Call Our Legal Team Today
If you have questions about this year’s inflation adjustments, feel free to contact experienced Florida tax attorney Ronald Cutler, P.A. at 386-490-9949. A member of our legal team is standing by and eager to help you throughout each step of your case.