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Personal Tax Tips

CLICK HERE TO VIEW MY BLOG FOR NEWS/TIPS ABOUT THE NEW TAX LAWS EFFECTIVE FOR THIS 2018 TAX YEAR.  


MAJOR CHANGES FOR 2018 RETURNS 

 Here are some basics:

  • Personal exemptions have been eliminated.
  • Standard Deductions are almost doubled from the rates in 2017.
    • $12,000 (singles) (married filing separately)
    • $24,000 (married filing joint)
    • $18,000 (head of household)

     Earned Income and AGI Limits (Slight increases from 2017)

      Earned income and adjusted gross income (AGI) must each be less than:

If filing...Qualifying Children Claimed
ZeroOneTwoThree or more
Single, Head of Household or Widowed$15,270$40,320$45,802$49,194
Married Filing Jointly$20,950$46,010$51,492$54,884

   

  Note:  Investment income must be $3,450 or less for the year.


  Maximum Credit Amounts for Tax Year 2018 is:    

  • $6,431 with three or more qualifying children
  • $5,716 with two qualifying children
  • $3,461with one qualifying child
  • $519 with no qualifying children

 For more information on whether a child qualifies you for EIC, see:



  Major Changes in Child Tax Credit

In 2018, the credit will be available to far more households, thanks to a massive raise in the phaseout thresholds. Here's a quick guide to the Child Tax Credit phaseout thresholds for 2018.  AGI means Adjusted Gross Income (basically your total income). In previous tax years, the credit has only been available for low- to middle-income households. For instance, the credit began to disappear in 2017 for married couples who earned more than $110,000 and for single filers with AGI above $75,000.

Tax Filing Status

Maximum AGI for Full Credit

AGI Where Credit Disappears

Single

$200,000

Over $240,000

Married filing jointly

$400,000

Over $440,000

Head of household

$200,000

Over $240,000

Married filing separately

$200,000

Over $240,000

DATA SOURCE: GOP TAX REFORM BILL.


Federal long-term capital gains basically same as 2017.
The chart below may help you if you are concerned about long term capital gains (investments held over 1 year).

The long-term capital gains rate is now based on your maximum taxable income levels. These levels are virtually the same as they were in 2017, despite the new change from tax brackets to income levels.  For married filing joint taxpayers:

Income

Long-Term Capital Gains Rate

up to $77,200

0%

$77,200-$479,000

15%

Over $479,000


20%

Source: Matthew Frankel, CFP, THE MOTLEY FOOL-YOUR GUIDE TO CAPITAL GAINS TAXES IN 2018.  Published 12-22-17.


Please note the following:

First, if your long-term capital gains take you into a higher tax bracket, only the gains above that threshold will be taxed at the higher rate. In other words, if your long-term capital gains bring your taxable income $1 over the level for the 0% bracket, only $1 will be taxed at 15%, and the rest of your long-term capital gains will be taxed at 0%.

Second, for single taxpayers who make more than $200,000 per year and married taxpayers who file jointly and earn more than $250,000, there is an additional 3.8% tax on investment income, including capital gains, above a certain level because of the net investment income tax.


DELINQUENT TAXPAYERS--THE IRS IS GETTING SERIOUS ABOUT YOU!!

According to an article by Michael Cohn in Accounting Today News, there has been a bill passed in Congress and signed by Obama in December 2015  that will allow the State Department to revoke the passports of long-term tax delinquents who owe the IRS over $50,000 in tax debts.  I know to most of us $50K is a lot of money, but this amount could be an accumulation of several years, so it really would not take many years to owe this kind of money.  Okay, you say," no problem, I don't travel overseas", BUT there is another sneaky provision...they are gonna hire PRIVATE TAX COLLECTORS!!  Be sure your tax returns are current--of course MTL is ready and able to help you do just that. 
 
Note: Please be aware that criminals are posing as IRS agents trying to get you to pay PHONY tax debts.  DO NOT answer any questions to someone calling you.  The IRS ALWAYS writes, they do not call or email.  

However, now that this law has passed, I'm not sure what the protocol for the tax collectors will be.  IF YOU OWE THE IRS BACK TAXES OR HAVE NOT FILED, CONTACT ME SO WE CAN GET THIS TAKEN CARE OF!!!

I can give you a copy of this entire article if you wish, or you can download it at http://www.accountingtoday.com/news/tax-practice/highway-bill-revoke-passports-tax-delinquents-private-debt-collectors-76612-1.html.  Be sure to note the "continue to site" click on top right of page so that you don't buy or get signed up for something you may not want.  Yes, they are calling this a HIGHWAY BILL!!!  

This is the last year for the Obamacare tax penalty.

If you were not insured during 2018, you will have to pay the penalty.  If you are not insured during 2019, you will NOT have to pay the penalty.  Therefore 2018 tax return is the last one that will have the penalty.



Backdoor Roth IRA (for marrieds making more than $184K or singles over $117K)

This tip came from a savvy client. Normally the income of marrieds making approximately $184,000 ($117,000 if single) does not allow them to make a full Roth contribution.  A Roth IRA is desirable for those making money in taxable accounts (interest, dividends).  If the money is instead in a Roth IRA, the interest, dividends, and proceeds of any sales of the asset are not taxable.  For those of you that make over the above amounts and would like to make a ROTH contribution if you could, I highly suggest that you read the article written by Harry Sit at http://thefinancebuff.com/the-backdoor-roth-ira-a-complete-how-to.html.  

Other Miscellaneous Information:

Social Security wage base for 2018 is $128,400. Under age 66, the amount you can make is $17,040 in 2018 before you start to lose a portion of your social security benefits. However, if you are over age 66, you can earn any amount of money and still draw your full social security benefits.  


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