The Tax Cut and Jobs Act took effect this year. So, you may see some changes while filing your taxes for 2018. Here are some of the changes that may affect you.
1. Tax Brackets
The Tax Cut and Jobs Act (TCJA) updated tax brackets. The new income brackets are:
| Tax Rate | Single Filers | Married Filing Jointly and Qualifying Widow(er) | Married Filing Separately | Head of Household |
| 10% | $0–$9,525 | $0–$19,050 | $0–$9,525 | $0–$13,600 |
| 12% | $9,526–$38,700 | $19,051–$77,400 | $9,526–$38,700 | $13,601–$51,800 |
| 22% | $38,701–$82,500 | $77,401–$165,000 | $38,701–$82,500 | $51,801–$82,500 |
| 24% | $82,501–$157,500 | $165,001–$315,000 | $82,501–$157,500 | $82,501–$157,500 |
| 32% | $157,501–$200,000 | $315,001–$400,000 | $157,501–$200,000 | $157,501–$200,000 |
| 35% | $200,001–$500,000 | $400,001–$600,000 | $200,001–$300,000 | $200,001–$500,000 |
| 37% | $500,001+ | $600,001+ | $300,001+ | $500,001+ |
2. Standard Deductions
TCJA increased the standard deduction significantly. It’s now $12,000 for taxpayers who file single or who are married and filing separately, $18,000 for heads of household, and $24,000 for couples who are married and filing jointly or filing as a qualifying widow(er).
3. Exemptions
One major change of the tax reform is the elimination of the personal exemption. The dependent exemption is also eliminated. These eliminations are temporary and set to expire in 2025 but could be extended.
4. Child Care Credit
TCJA increased the child care credit to $2,000, and $1,400 of that is refundable. Additionally, the taxable income levels at which this credit begins to phase out were increased. For married couples filing jointly, the phaseout begins at $400,000.
5. Mortgage Interest Deduction
If you pay interest on a mortgage used to buy your home, you can deduct the interest paid up to the first $750,000 in principal. You may also be able to deduct interest paid on a home equity loan or line of credit, so long as you used the funds to build or improve the home that secures the loan.
6. Adoption Credit
The federal adoption tax credit is still in place and has increased slightly for cost-of-living adjustments. It is $13,840 per child for the 2018 tax year. Income-based restrictions may apply, so it’s a good idea to check the specifics via the IRS website.
7. Roth IRA
Tax reform raised the income level restrictions on Roth contributions. For single filers, the phaseout happens if your modified taxable income falls between $120,000 and $135,000. For married couples filing jointly, that range is $189,000 to $199,000.
8. Earned Income Tax Credit (EITC)
The EITC still works the same. If you earned an income but it falls below a certain threshold, you may qualify for the EITC. The amount of the credit is updated each year based on cost of living, and how much you qualify for depends on the amount of income you earned and the number of qualifying children you claim.
9. Earned Income Credit (EIC)
Technically referred to as the individual shared responsibility payment, the health insurance penalty will go away in 2019. However, it’s still in place for the 2018 tax year. To help you calculate the amount you may owe if you didn’t have health insurance in 2018, the IRS provides a payment estimator.
10. Alternative Minimum Tax (AMT) Exemption
If your taxable income is above a certain amount, you may be required to pay the alternative minimum tax (AMT) instead. The maximum AMT rate remains at 28 percent, though the exemptions allowed for AMT purposes are significantly higher in 2018.
You pay an amount referred to as AMTI. AMTI is taxable income, with some of the deductions added back in. This rate starts at an AMTI level of $95,750 for married filing separate tax filers or $191,500 for married couples filing jointly for the 2018 tax year. For AMTI below these amounts, the rate is 26%.
Annual changes to tax-filing laws can be difficult to keep up with, but a tax professional can provide customized help. Visit the Regions Tax Center for more information.
