The bill retains the seven tax brackets found in current law, but lowers a number of the tax rates. It also changes the income thresholds at which the rates apply.
The current brackets are: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%
The new brackets will be: 10%, 12%, 22%, 24%, 32%, 35% and 37%
The income thresholds at which these brackets kick in have changed, as well.
The bill also eases the burden of the individual alternative minimum tax (AMT) by raising the income exempted from $84,500 (adjusted for inflation) to $109,400 married filing jointly and from $54,300 (adjusted for inflation) to $70,300 for single taxpayers, so fewer taxpayers will pay it.
The new tax law nearly doubles the standard deduction amount. Single taxpayers will see their standard deductions jump from $6,350 for 2017 taxes to $12,000 for 2018 taxes (the ones you file in 2019).
Married couples filing jointly see an increase from $12,700 to $24,000. These increases mean that fewer people will have to itemize. Today, roughly 30% of taxpayers itemize. Under the new law, this percentage is expected to decrease.
For, families with children the Child Tax Credit is doubled from $1,000 per child to $2,000. In addition, the amount that is refundable grows from $1,100 to $1,400. The bill also adds a new, non-refundable credit of $500 for dependents other than children. Finally, it raises the income threshold at which these benefits phase out from $110,000 for a married couple to $400,000.
The bill eliminates the personal and dependent exemptions which were $4,050 for 2017 and increased to $4,150 in 2018.
The bill limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes have generally been fully tax deductible.
The bill also caps the amount of mortgage indebtedness on new home purchases on which interest can be deducted at $750,000 down from $1,000,000 in current law.
The bill eliminates the tax penalty for not having health insurance after December 31, 2018. It also temporarily lowers the floor above which out-of-pocket medical expenses can be deducted from the current law floor of 10% to 7.5% for 2017 and 2018
So for 2018, you can deduct medical expenses that are more than 7.5% of your adjusted gross income as opposed to the higher 10%.
The bill has a myriad of changes for business. The biggest includes a reduction in the top corporate rate to 21%, a new 20% deduction for incomes from certain type of “pass-through” entities (partnerships, S Corps, sole proprietorships), limits on expensing of interest from borrowing, almost doubling of the amount small businesses can expense from the 2017 Section 179 amount of $510,000 to $1,000,000, and eliminates the corporate alternative minimum tax (AMT).
2018
FEDERAL
INCOME TAX
BRACKET
(FOR TAXES DUE IN APRIL 2019)
Expand the filing status that applies to you.
| SINGLE FILERS | ||
| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 10% | $0 to $9,525 | 10% of taxable income |
| 12% | $9,526 to $38,700 | $952.50 plus 12% of the amount over $9,525 |
| 22% | $38,701 to $82,500 | $4,453.50 plus 22% of the amount over $38,700 |
| 24% | $82,501 to $157,500 | $14,089.50 plus 24% of the amount over $82,500 |
| 32% | $157,501 to $200,000 | $32,089.50 plus 32% of the amount over $157,500 |
| 35% | $200,001 to $500,000 | $45,689.50 plus 35% of the amount over $200,000 |
| 37% | $500,001 or more | $150,689.50 plus 37% of the amount over $500,000 |
| MARRIED, FILING JOINTLY | ||
| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 10% | $0 to $19,050 | 10% of taxable income |
| 12% | $19,051 to $77,400 | $1,905 plus 12% of the amount over $19,050 |
| 22% | $77,401 to $165,000 | $8,907 plus 22% of the amount over $77,400 |
| 24% | $165,001 to $315,000 | $28,179 plus 24% of the amount over $165,000 |
| 32% | $315,001 to $400,000 | $64,179 plus 32% of the amount over $315,000 |
| 35% | $400,001 to $600,000 | $91,379 plus 35% of the amount over $400,000 |
| 37% | $600,001 or more | $161,379 plus 37% of the amount over $600,000 |
| MARRIED, FILING SEPARATELY | ||
| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 10% | $0 to $9,525 | 10% of taxable income |
| 12% | $9,526 to $38,700 | $952.50 plus 12% of the amount over $9,525 |
| 22% | $38,701 to $82,500 | $4,453.50 plus 22% of the amount over $38,700 |
| 24% | $82,501 to $157,500 | $14,089.50 plus 24% of the amount over $82,500 |
| 32% | $157,501 to $200,000 | $32,089.50 plus 32% of the amount over $157,500 |
| 35% | $200,001 to $300,000 | $45,689.50 plus 35% of the amount over $200,000 |
| 37% | $300,001 or more | $80,689.50 plus 37% of the amount over $300,000 |
| HEAD OF HOUSEHOLD | ||
| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 10% | $0 to $13,600 | 110% of taxable income |
| 12% | $13,601 to $51,800 | $1,360 plus 12% of the amount over $13,600 |
| 22% | $51,801 to $82,500 | $5,944 plus 22% of the amount over $51,<800> |
| 24% | $82,501 to $157,500 | $12,698 plus 24% of the amount over $82,500 |
| 32% | $157,501 to $200,000 | $30,698 plus 32% of the amount over $157,500 |
| 35% | $200,001 to $500,000 | $44,298 plus 35% of the amount over $200,000 |
| 37% | $500,001 or more | $149,298 plus 37% of the amount over $500,000 |