Rev. Proc. 2017-58: Inflation adjustments for 2018 | KPMG | US

Rev. Proc. 2017-58: Inflation adjustments for 2018

Rev. Proc. 2017-58: Inflation adjustments for 2018

The IRS today released an advance version of Rev. Proc. 2017-58 that provides the annual inflation adjustments for more than 50 tax provisions, including the tax rate schedules and other tax amounts for 2018 (and thus generally will be used by individuals on their 2019 returns) as adjusted for inflation for 2018.

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Rev. Proc. 2017-58 [PDF 95 KB] provides details about these annual adjustments. The tax year 2018 adjustments generally are used on tax returns filed in 2019.

Certain individual income tax amounts increase, others unchanged for 2017

As briefly explained in a related IRS release—IR 2017-178 (October 19, 2017)—the following items reflect the inflation adjustments for 2018:

Standard deduction

Taxpayers 2018 amount Compared to 2017 amount
Married filing jointly
$13,000 Up from $12,700
Single / married filing separately $6,500 Up from $6,350
Heads of households $9,550 Up from $9,350

Personal exemption: $4,150—Up from $4,050

 

Personal exemption phase-out:

  • Personal exemption phase-out begins with adjusted gross income (AGI) of $266,700 ($320,000 for married filing jointly). 
  • Personal exemption phases out completely at AGI of $389,200 ($442,500 for married filing jointly).

 

39.6% income tax rate: For tax year 2018, the 39.6% tax rate applies for:

  • Single taxpayers whose income exceeds $426,700 (up from $418,400 in 2017)
  • Married taxpayers filing jointly whose income exceeds $480,050 (up from $470,700 in 2017)

 

Itemized deduction limits

  • The limitation for itemized deductions to be claimed on tax year 2018 returns of single taxpayers begins with incomes of $266,700 or more ($320,000 for married filing jointly).

 

AMT exemption

  • The alternative minimum tax (AMT) exemption amount for tax year 2018 is increased to $55,400 for single taxpayers ($86,200 for married filing jointly). The 2017 exemption amount was $54,300 ($84,500 for married filing jointly). 
  • The AMT exemption begins to phase out for single taxpayers at $123,100 ($164,100 for married filing jointly). 

 

Foreign earned income exclusion

For tax year 2018, the foreign earned income exclusion is $104,100 (up from $102,100 for tax year 2017)

 

Earned income credit (EIC)

The tax year 2018 maximum EIC amount is $6,444 for taxpayers filing jointly who have three or more qualifying children (up from a total of $6,318 for tax year 2017). 

Benefits

For tax year 2018:

  • The monthly limitation for the qualified transportation fringe benefit is $260. 
  • The monthly limitation for qualified parking is $260.
  • The dollar amount used to determine the penalty for not maintaining minimum essential health coverage is $695 (this amount is for calendar year 2018).
  • The adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $114,000 (up from $112,000 for tax year 2017).

 

Medical Savings Accounts (MSAs)

Medical Savings Accounts (MSAs) Self-only coverage Family coverage
Minimum annual deductible $2,300 (up $50) $4,600 (up $100)
Maximum annual deductible $3,450 (up $100) $6,850 (up $100)
Maximum annual out-of-pocket expenses $4,600 (up $100) $8,400 (up $150)

 

Estate and gift tax amounts

  • Estates of decedents who die during 2018 have a basic exclusion amount of $5,600,000 (up from a total of $5,490,000 for estates of decedents who died in 2017).
  • For 2017, the exclusion from tax on a gift to a spouse who is not a U.S. citizen is $152,000 (up from $149,000 for 2017).
  • The annual exclusion for gifts increased by $1,000 to $15,000 for 2018.

 

Inflation adjustments for 2018—items of interest to exempt organizations

  • The exemption of annual dues paid by a member to an agricultural or horticultural organization that is not characterized as “unrelated trade or business” income (UBTI) will be $166.
  • The UBTI of certain exempt organizations will not include a “low cost article” of $10.90 or less.
  • The $5, $25, and $50 guidelines for disregarding insubstantial benefits received by a donor in return for a fully deductible charitable contribution under section 170 (as set forth in Rev. Proc. 90-12, as amplified by Rev. Proc. 92-49 and modified by Rev. Proc. 92-102) will be $10.90, $54.50, and $109, respectively.
  • For tax years beginning in 2018, the annual per person, family or entity limitation to qualify for the reporting exception for nondeductible lobbying expenses under section 6033(e)(3) will be $115 or less.

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