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 to the tax numbers 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 $5,600,000, up from $5,490,000 in 2017.
Personal exemption
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).
Standard deduction
These amounts have been adjusted as follows:
| 2017 | 2018 | |
|---|---|---|
| Single | $6,350 | $6,500 |
| HOH | $9,350 | $9,550 |
| MFJ | $12,700 | $13,000 |
| MFS | $6,350 | $6,500 |
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)
| 2017 | 2018 | |
|---|---|---|
| Maximum AMT exemption amount | ||
| Single/HOH |
$54,300 |
$55,400 |
| MFJ |
$84,500 |
$86,200 |
| MFS |
$42,250 |
$43,100 |
| Exemption phaseout threshold | ||
| Single/HOH |
$120,700 |
$123,100 |
| MFJ |
$160,900 |
$164,100 |
| MFS |
$80,450 |
$82,050 |
| 26% on AMTI* up to this amount, 28% on AMTI above this amount | ||
| MFS |
$93,900 |
$95,750 |
| All others |
$187,800 |
$191,500 |
| *Alternative minimum taxable income | ||
