There were several important updates to the tax code in 2017, which could affect your Federal income tax return preparation. From tax bracket adjustments to higher available standard deductions, these new laws could mean a larger tax refund check in 2018.
What's new about Federal Income Tax Returns
1) Increase in Standard Deductions
The standard deduction is changing on your 2017 Federal income tax return. The increase will put a modest amount of money back in the pockets of anyone who chooses this method of paying taxes.
- $50 for single filers
- $100 for married couples, filing jointly
For this year, single filers are entitled to a standard deduction of $6,350, while married couples can claim double that amount. The head of the household standard deduction has been set to $9,350.
2) Higher Personal-Exemption Allowance
If you choose to itemize your taxes, you will also receive a higher threshold for deductions. The personal-exemption allowance has been increased $4,050 to $4,150.
3) Removal of Seniors’ Medical Expense Exemption
Senior citizens could be negatively impacted by changes to this year’s tax code. On past itemized Federal income tax returns, seniors were permitted to deduct medical expenses that totaled more than 7.5 percent of their adjusted gross income (AGI). This exemption ends this year, which will allow seniors to only claim the deduction for expenses over 10 percent of their AGI.
4) Alternative Minimum Tax Exemption Amounts Rise with Inflation
The Alternative Minimum Tax (AMT) is designed to ensure that wealthier Americans pay their fair share of taxes. Its income exemption limits are rising this year, too.
- For single filers, it will be $55,400
- Married couples filing jointly will see their income exemption increase to $86,200
The AMT will phase-out at $123,100 for individuals and $164,100 for married couples.
5) Tax Bracket Updates
Each year, the government adjusts tax brackets based on fluctuations in inflation. Since inflation is relatively low, there is only a modest increase in the thresholds for each tax bracket.
- The lowest tax bracket will rise only $50
- The highest tax bracket will increase $3,550
The 2018 tax bracket changes are not expected to make a significant impact on the majority of Americans.
These five tax code adjustments are just a few of the many changes that could affect your tax return. If you would like to know more this year’s Federal tax laws, contact your local accountant.