2018 Tax Tables and Brackets: Deductions Go Up

With or without a tax reform package in Congress, tax experts are projecting significant savings for many Americans on next year’s taxes. The projections include projection of tax items that are adjust for inflation, and give taxpayers early notice of the amount of tax savings that may be realized as a result of increases to standard deduction amounts, upward adjustments to tax brackets, and increases in hundreds of other key thresholds.

In 2018, Bloomberg BNA also forecasts the first increase in the annual gift tax exclusion in five years, from $14,000 to $15,000. The full report is available at http://about.bna.com/2018-PTR.

Individual Income Tax Brackets

Because a higher Consumer Price Index (CPI) pushes the ranges of the income brackets upward and also increases the standard deduction and exemption amounts, the taxes due on the same income decrease from year to year. For example, suppose married taxpayers filing jointly compute tax on $237,000. In 2017, they were in the 33% bracket and paid $53,427 in tax. In 2018, the brackets are adjusted for inflation, and our taxpayers are now in the lower 28% bracket and will pay $52,983 in tax, “saving” $444 compared to 2017.

High-income taxpayers will enjoy a measure of relief in 2018 as well, because the top 39.6% tax bracket is projected to begin at $480,050 for married taxpayers filing joint returns and at $426,700 for unmarried individuals. This represents an increase from $470,700 and $418,400, respectively in 2017.

Bloomberg BNA has projected the 2018 income tax rate tables shown below. The tables for other filing situations are included in Bloomberg BNA’s full report.

Married Filing Jointly and Surviving Spouses

If Taxable Income Is:	The Tax Is:
Not Over $19,050	10% of the taxable income
Over $19,050 but not over $77,400	$1,905 plus 15% of excess over $19,050
Over $77,400 but not over $156,150	$10,657.50 plus 25% of excess over $77,400
Over $156,150 but not over $237,950	$30,345 plus 28% of excess over $156,150
Over $237,950 but not over $424,950	$53,249 plus 33% of excess over $237,950
Over $424,950 but not over $480,050	$114,959 plus 35% of excess over $424,950
Over $480,050	$134,244 plus 39.6% of excess over $480,050

Unmarried Individuals (other than Surviving Spouses and Heads of Households)

If Taxable Income Is:	The Tax Is:
Not Over $9,525	10% of the taxable income
Over $9,525 but not over $38,700	$952.50 plus 15% of excess over $9,525
Over $38,700 but not over $93,700	$5,328.75 plus 25% of excess over $38,700
Over $93,700 but not over $195,450	$19,078.75 plus 28% of excess over $93,700
Over $195,450 but not over $424,950	$47,568.75 plus 33% of excess over $195,450
Over $424,950 but not over $426,700	$123,303.75 plus 35% of excess over $424,950
Over $426,700	$123,916.25 plus 39.6% of excess over $426,700

Personal Exemption and Standard Deduction

Most taxpayers are entitled to claim a personal exemption for each member of their household. For 2018, the personal exemption amount is projected to increase slightly from $4,050 to $4,150. The personal exemption is phased out for high-income taxpayers. The projected phase-out levels are available in the full report.

When calculating their deductions, taxpayers may choose to take the higher of their itemized deductions or the standard deduction. The standard deduction amount varies depending on filing status. The standard deduction amounts for 2018 are projected to increase slightly from 2017.

Filing Status	Standard Deduction
Married Filing Jointly/Surviving Spouses	$13,000
Heads of Household	$9,550
All Other Taxpayers	$6,500

Alternative Minimum Tax (AMT)

For some taxpayers, inflation adjustments make the difference between having to pay AMT or not. The AMT exemptions are projected for 2018 as shown below.

Filing Status	Exemption Amount
Married Filing Jointly/Surviving Spouses	$86,200
Unmarried Individuals (other than Surviving Spouses)	$55,400
Married Individuals Filing Separate Returns	$43,100
Estates and Trusts	$24,600

Retirement Savings Accounts

Traditional and Roth IRAs provide tax advantages for retirement savings. Contributions to a traditional IRA are deductible in the year made, and distributions are taxed. Contributions to a Roth IRA, on the other hand, are not deductible but distributions are received free of tax. For 2018, Bloomberg BNA projects the maximum contribution limit for traditional and Roth IRAs to be $5,500 for individuals under age 50 and $6,500 for individuals age 50 and above. Projected amounts for other savings vehicles are included in the full report.

Estate and Gift Tax Exclusions

Bloomberg BNA projects that the estate tax basic exclusion for decedents dying in 2018 will be $5.6 million. The exclusion amount was $5.49 million in 2017. The annual gift tax exclusion is projected to increase from $14,000 to $15,000 in 2018.

The 2018 projections of inflation-adjusted tax amounts are just one of the value-added features Bloomberg BNA provides taxpayers and the professionals that serve them.