All You Need To Know About The Tax Changes

Dated: 02/22/2018

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 All you need to know about the TAX changes



In President Trump's campaign tax plan, he proposed reducing the number of tax brackets from seven to three, and the House of Representatives' original tax reform bill contained four brackets. However, the final bill kept the seven-bracket structure but with mostly lower tax rates.

Marginal Tax Rate

Single

Married Filing Jointly

Head of Household

Married Filing Separately

10%

$0-$9,525

$0-$19,050

$0-$13,600

$0-$9,525

12%

$9,525-$38,700

$19,050-$77,400

$13,600-$51,800

$9,525-$38,700

22%

$38,700-$82,500

$77,400-$165,000

$51,800-$82,500

$38,700-$82,500

24%

$82,500-$157,500

$165,000-$315,000

$82,500-$157,500

$82,500-$157,500

32%

$157,500-$200,000

$315,000-$400,000

$157,500-$200,000

$157,500-$200,000

35%

$200,000-$500,000

$400,000-$600,000

$200,000-$500,000

$200,000-$300,000

37%

Over $500,000

Over $600,000

Over $500,000

Over $300,000

DATA SOURCE: JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE.

For comparison, here are the 2018 tax brackets that were set to take effect under previous tax law.

Marginal Tax Rate

Single

Married Filing Jointly

Head of Household

Married Filing Separately

10%

$0-$9,525

$0-$19,050

$0-$13,600

$0-$9,525

15%

$9,525-$38,700

$19,050-$77,400

$13,600-$51,850

$9,525-$38,700

25%

$38,700-$93,700

$77,400-$156,150

$51,850-$133,850

$38,700-$78,075

28%

$93,700-$195,450

$156,150-$237,950

$133,850-$216,700

$78,075-$118,975

33%

$195,450-$424,950

$237,950-$424,950

$216,700-$424,950

$118,975-$212,475

35%

$424,950-$426,700

$424,950-$480,050

$424,950-$453,350

$212,475-$240,025

39.6%

Over $426,700

Over $480,050

Over $453,350

Over $240,025

DATA SOURCE: IRS.

The marriage penalty is (mostly) gone

One thing to notice from these brackets is that the so-called marriage penalty, which many Republican leaders (including President Trump) wanted to eliminate, is almost absent.

If you're not familiar, here's a simplified version of how the marriage penalty works. Let's say that two single individuals each earned a taxable income of $90,000 per year. Under the old 2018 tax brackets, both of these individuals would fall into the 25% bracket for singles. However, if they were to get married, their combined income of $180,000 would catapult them into the 28% bracket. Under the new brackets, they would fall into the 24% marginal tax bracket, regardless of whether they got married or not.

In fact, the married filing jointly income thresholds are exactly double the single thresholds for all but the two highest tax brackets in the new tax law. In other words, the marriage penalty has been effectively eliminated for everyone except married couples earning more than $400,000.


WHAT IS GOING AWAY:

 

While many deductions are remaining under the new tax law, there are several that didn't survive, in addition to those already mentioned elsewhere in this guide. Gone for the 2018 tax year are the deductions for:

  • Casualty and theft losses (except those attributable to a federally declared disaster)

  • Unreimbursed employee expenses

  • Tax preparation expenses

  • Other miscellaneous deductions previously subject to the 2% AGI cap

  • Moving expenses

  • Employer-subsidized parking and transportation reimbursement

For complete article


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Tamara Whelpley

Tamara Whelpley has lived and worked in Denver and Boulder for over 30 years and is an expert in Washington Park, Cherry Creek, Highlands and throughout the Denver corridor. Consulting is her top pri....

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