You may have heard there are some major changes to the tax code starting in 2018. While these won’t affect your tax filing until 2019, it’s important to get the lay of the land now so you can make informed financial decisions throughout the year.
One of the biggest changes has to do with the new 2018 tax brackets. Read on to find out what’s different and what those changes could mean for you.
Income Ranges Are Capped Higher
In 2018, there is still the same number of tax brackets (seven) as in 2017, but the income range of each bracket is slightly higher.
For example, in 2017, the first tax bracket for married taxpayers filing jointly was $0 to $18,650. This bracket was taxed at a rate of 10%.
In 2018, the tax rate is still 10% for the initial tax bracket, but the income range now goes from $0 to $19,050. This means that more of your income is taxed at a lower rate.
This shift can be seen across all the tax brackets. In almost every bracket, the upper limit of the taxable income has been raised.
Tax Rates Are Lower
In addition to raising the income range, 2018’s tax brackets also usher in lower tax rates. The bottom range is still the same as the 2017 rate at 10%. However, the rates of subsequent tax brackets have mostly shifted down.
For example, in 2017, the tax brackets started at 10% and then went to:
Now compare that to 2018. The lowest tax bracket still has a 10% rate, but the following rates are:
As you can see, most of the 2018 rates are lower than the 2017 rates. Even the one rate that remains the same (35%) is different in practice because its corresponding income range has changed.
In short, your tax liability may be lower in 2018 than it was in 2017. To find out how these new 2018 tax brackets affect you specifically, give the team at Taxation Solutions, Inc. a call. We are here to provide tax help and tax planning assistance to clients in Indianapolis and the surrounding area. Call us today to set up an appointment!