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).
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:
|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 – $10,00|
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:
|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 $5,600,000, up from $5,490,000 in 2017.
The personal exemption amount for 2018 is $4,150, up from $4,050 in 2017. For 2018, personal exemptions begin to phase out once AGI exceeds $266,700 (single), $293,350 (HOH), $320,000 (MFJ), or $160,000 (MFS).
Note: These same AGI thresholds apply in determining if itemized deductions may be limited. The corresponding 2017 threshold amounts were $261,500 (single), $287,650 (HOH), $313,800 (MFJ), or $156,900 (MFS).
These amounts have been adjusted as follows:
Note: The 2018 additional standard deduction amount (age 65 or older, or blind) 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)
|Maximum AMT exemption amount|
|Exemption phaseout threshold|
|26% on AMTI* up to this amount, 28% on AMTI above this amount|
*Alternative minimum taxable income
Proposed tax reform legislation may make changes to the estate and gift tax, the personal exemption, the standard deduction, and the alternative minimum tax.
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