Provided by Joseph V. Curatolo
Every year, the Internal Revenue Service announces cost-of-living adjustments that affect contribution limits for retirement plans, thresholds for deductions and credits, and standard deduction and personal exemption amounts. Here are a few of the key adjustments for 2018.
Employer retirement plans
• Employees who participate in 401(k), 403(b), and most 457 plans can defer up to $18,500 in compensation in 2018 (up from $18,000 in 2017); employees age 50 and older can defer up to an additional $6,000 in 2018 (the same as in 2017).
• Employees participating in a SIMPLE retirement plan can defer up to $12,500 in 2018 (the same as in 2017), and employees age 50 and older can defer up to an additional $3,000 in 2018 (the same as in 2017).
IRAs
The limit on annual contributions to an IRA remains unchanged at $5,500 in 2018, with individuals age 50 and older able to contribute an additional $1,000. For individuals who are covered by a workplace retirement plan, the deduction for contributions to a traditional IRA is phased out for the following modified adjusted gross income (AGI) ranges:
2017/2018
Single/head of household (HOH) $62,000 – $72,000/$63,000 – $73,000
Married filing jointly (MFJ) $99,000 – $119,000/$101,000 – $121,000
Married filing separately (MFS) $0 – $10,000/$0 – $10,000
Note: The 2018 phaseout range is $189,000 – $199,000 (up from $186,000 – $196,000 in 2017) when the individual making the IRA contribution is not covered by a workplace retirement plan but is filing jointly with a spouse who is covered.
The modified AGI phaseout ranges for individuals to make contributions to a Roth IRA are:
2017/2018
Single/HOH $118,000 – $133,000/$120,000 – $135,000
MFJ $186,000 – $196,000/$189,000 – $199,000
MFS $0 – $10,000/$0 – $10,000
Estate and gift tax
• The annual gift tax exclusion for 2018 is $15,000, up from $14,000 in 2017.
• The gift and estate tax basic exclusion amount for 2018 is $11,200,000, up from $5,490,000 in 2017.
Personal exemption
There is no personal exemption amount for 2018; it was $4,050 in 2017. For 2018, there is no phaseout of personal exemptions or overall limit on itemized deductions once AGI exceeds certain thresholds.
Note: For 2017, personal exemptions were phased out and itemized deductions were limited once AGI exceeded $261,500 (single), $287,650 (HOH), $313,800 (MFJ), or $156,900 (MFS).
Standard deduction
2017/2018
Single $6,350/$12,000
HOH $9,350/$18,000
MFJ $12,700/$24,000
MFS $6,350/$12,000
Note: The additional standard deduction amount for the blind or aged (age 65 or older) in 2018 is $1,600 (up from $1,550 in 2017) for single/HOH or $1,300 (up from $1,250 in 2017) for all other filing statuses. Special rules apply if you can be claimed as a dependent by another taxpayer.
Alternative minimum tax (AMT)
2017/2018
Maximum AMT exemption amount
Single/HOH $54,300/$70,300
MFJ $84,500/$109,400
MFS $42,250/$54,700
Exemption phaseout threshold
Single/HOH $120,700/$500,000
MFJ $160,900/$1,000,000
MFS $80,450/$500,000
26% rate on AMTI* up to this amount, 28% rate on AMTI above this amount
MFS $93,900/$95,750
All others $187,800/$191,500
*Alternative minimum taxable income.
Joseph V. Curatolo is president of Georgetown Capital Group, 5350 Main St., Williamsville (phone: 633-9800, toll-free 1 (800) 648-8091, fax 633-9789, www.georgetowncapital.com).
Insurance services offered by Georgetown Capital Group, which is independent of Royal Alliance Associates, Inc., with separate ownership, and is not registered as a broker-dealer or investment advisor.
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Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018.
