If you’re paying taxes, then the 2018 tax brackets matter. The Tax Cuts and Jobs Act (TCJA) signed into law in November 2017 changed the rates for different tax brackets and exemptions, affecting anyone planning to file a tax return for the 2018 calendar year. This article outlines the changes to 2018 tax brackets versus 2017. It also discusses their impact on the return you will file in 2019. We hope it provides clarity for anyone filing and paying taxes for this present calendar year.
In this article:
2018 Tax Brackets | The Changes and Their Impact on Your 2018 Tax Return
Breaking Down 2018 Tax Brackets
The amount of taxable income and your filing status determine your 2018 tax brackets. The new tax law changes didn’t impact the number of brackets. It did, however, change the rates for each segment. Here’s a look at how the tax rate for each bracket changed once the law went into effect.
2017 Tax Brackets for Single Filers
Rate Income
- 10% $0 to $9,325
- 15% $9,325 to $37,950
- 25% $37,950 to $91,900
- 28% $91,900 to $191,650
- 33% $191,650 to $416,700
- 35% $416,700 to $418,400
- 39.60% Over $418,400
2018 Tax Brackets for Single Filers
Rate Income
- 10% $0 to $9,525
- 12% $9,526 to $38,700
- 22% $38,701 to $82,500
- 24% $82,501 to $157,500
- 32% $157,501 to $200,000
- 35% $200,001 to $500,000
- 37% Over $500,001
2017 Tax Brackets for Married Couples
Rate Income
- 10% $0 to $18,650
- 15% $18,651 to $75,900
- 25% $75,901 to $153,100
- 28% $153,101 to $233,350
- 33% $233,351 to $416,700
- 35% $416,700 to $470,700
- 39.60% Over $470,701
2018 Tax Brackets for Married Couples
Rate Income
- 10% $0 to $19,050
- 12% $19,051 to $77,400
- 22% $77,401 to $165,000
- 24% $165,001 to $315,000
- 32% $315,001 to $400,000
- 35% $400,001 to $600,000
- 37% Over $600,001
2017 Tax Brackets for Married Filing Separately
Rate Income
- 10% $0 to $9,325
- 15% $9,326 to $37,950
- 25% $37,951 to $76,550
- 28% $76,551 to $116,675
- 33% $116,676 to $208,350
- 35% $208,351 to $235,350
- 39.60% Over $235,351
2018 Tax Brackets for Married Filing Separately
Rate Income
- 10% $0 to $9,525
- 12% $9,526 to $38,700
- 22% $38,701 to $82,500
- 24% $82,501 to $157,500
- 32% $157,501 to $200,000
- 35% $200,001 to $300,000
- 37% Over $300,001
2017 Tax Brackets for Head of Household
Rate Income
- 10% $0 to $13,350
- 15% $13,351 to $50,800
- 25% $50,801 to $131,200
- 28% $131,201 to $212,500
- 33% $212,501 to $416,700
- 35% $416,701 to $444,550
- 39.60% Over $444,551
2018 Tax Brackets for Head of Household
Rate Income
- 10% $0 to $13,600
- 12% $13,601 to $51,800
- 22% $51,801 to $82,500
- 24% $82,501 to $157,500
- 32% $157,501 to $200,000
- 35% $200,001 to $500,000
- 37% Over $500,001
How Tax Calculations Work
The IRS doesn’t only tax you according to the rates for your bracket. It uses a progressive tax system. It taxes you in chunks based on the filing status and any amount you make that falls into a tax bracket. Let’s look at an example below.
Let’s say you make $85,000 as a single filer. The IRS applies the tax rate of 10% on the first $9,525. Any amount you earned over that up to $38,700 receives a 12% tax. It keeps going up until you reach the last taxable bracket for your income.
What This Means for 2019
The tax law changes pushed some higher-income earners into lower brackets in 2019. It also increased the amount of the standard deduction available to each taxpayer. Someone making $150,000 in 2017 would have been able to take a deduction of $6,350 and taxed at a maximum of 28%. The same individual can now claim a standard deduction of $12,000 and cap their tax rate at 24%. This is according to the 2018 tax brackets.
Its impact on the 2018 tax return depends on the exemptions you want to claim. The tax law affects your gain from itemizing other deductions. You may end up saving less by itemizing instead of claiming a personal deduction. The law also modified or eliminated many other tax breaks.
Deductions Impacted by TCJA
- Personal exemptions
- State and local taxes (SALT)
- Expenses from natural disasters
- Equity and home mortgage interest
- Child tax credit
- Earned income tax credit (EITC)
- Student loan interest
- Adoption credit
Effects on the Alternative Minimum Tax
The alternative minimum tax (AMT) came into effect in the 1960s. The goal is to stop high earners from avoiding paying their fair share of taxes. It required them to calculate their taxes using both the standard tax brackets and the AMT. Then they have to pay the highest tax amount between the two.
A failure to tie the tax to inflation and variations in income for different regions had the unintended effect of penalizing low- and middle-class earners. Anyone taking a large amount of the deductions on their tax returns ended up subject to the AMT.
The 2018 tax law sets the personal exemption you could claim to avoid the AMT. It’s at $70,300 for individuals and $109,000 for joint filers. The new law begins phasing out exemptions at higher income levels. Single filers have the AMT exemption cut by 25% if they report income over $500,000. The amount rises to $1 million for married filers.
It doesn’t hurt to seek outside help if you still find the 2018 tax brackets confusing. You don’t want to end up paying less than you owe. It could mean extra penalties. A tax professional can also guide you through any deductions you’re still eligible for. In the process, you increase your savings. Stay aware of any proposed changes that could impact your finances the following tax year.
What do you think of the 2018 tax brackets? Share your thoughts in the comments section below.