The next couple of blog posts will examine the changes that will take place during this new tax year. We hope to provide you with insight whether you’re an individual filer or a business filing taxes. In a total of four blogs, three of which will examine individual tax changes from deductions, education and retirement, and one focusing on business changes to be aware of.
This blog will examine any changes being made to standard deductions, the “Kiddie Tax” and the health savings accounts.
Every New Year there is a good chance that tax law has changed, and 2018 is no different now that the Tax Cuts and Jobs Acts are in effect.
For Individual tax filers, there are a couple adjustments including the health savings account, adjustments for inflation, limits to retirement contributions, and exclusion of foreign income earned. For the most part tax income rate brackets remain similar to 2017, in that there are still seven brackets, but the threshold for each has increased a significant amount. Standard deductions have also risen significantly; for individual filing status it increases to $12,000 (from $6,350 in 2017) and for married couples it increases to $24,000 (from $12,700 in 2017). And personal exemptions have been eliminated through the 2025 tax year, in addition Alternative Minimum Tax amounts have increased; for individuals increasing to $70,300 (from $54,300 in 2017) and for married couples increased to $109,400 (from $84,500 in 2017). The phase out limit has also increased to $500,000 for individuals and to $1 million for married couples; the phase out threshold is the reduction of tax credit used by taxpayers in order to achieve income limits to qualify for that credit.
For all taxable years beginning in 2018, the amount for a child’s return, “Kiddie Tax,” will remain the same at $1,050; this amount can be used by the parent filer to determine if to include in the return the child’s unearned income. For this year, the amount of net unearned income of the child is more than $1,050 and less $10,500.
Health Savings Accounts payments are used to pay current or future medical expenses of the account owner, a spouse and a qualified dependent. Medical expenses are not reimbursable by any insurance company or another source. Medical expenses also do not qualify for federal income tax return. In order to qualify an individual must be covered by a High Deductible Health Plan, and have no coverage by another health insurance company with an exception for insurance for accidents, disability, dental care, vision care or long-term care. For the 2018 calendar year the HDHP qualifying requirements include a self-only deductible of at least $1,350 or a family coverage deductible of $2,700. There is a limit of $6,600 for self-only out-of-pocket expenses and a limit of $13,000 for family out-of-pocket coverage.
There are multiple changes to keep a track of this tax season. The following set of posts will explain the changes and help you get the most of your taxes.