2018 Federal Income Tax Brackets
The IRS has released the 2018 tax rates. Here they are by income and tax filing status. We also cover exemption amounts and standard deduction.
Ah, fall has arrived. You know, the time of year when the leaves change colors, the days get shorter . . . and the IRS releases next year’s tax brackets.
This year is no different. Last week, Uncle Sam let us know how much we can expect to pay in taxes next year, based on our income.
It’s important to remember that these numbers are not the ones you’ll be using to prepare your taxes this coming spring. (If you need a refresher, those numbers can be found on the 2017 bracket page.)
Instead, these 2018 brackets are for the taxes you can expect to pay on any income that you earn in 2018. This means that you’ll use these numbers for the taxes that you prepare in the spring of 2019. Let’s take a look and see what’s new.
Updated Tax Rates
The new brackets below outline the taxes that you can expect to pay from January through December of 2018, which you’ll then file in spring 2019. You can use them to adjust your withholdings and plan your finances next year (especially if you’re a contract employee or freelancer and need to pay quarterly taxes).
- Resource – View the different ways you can file your tax return with H&R Block
2018 Marginal Rates
As you can expect, bracket limits have been bumped for the year. The limits haven’t risen all that much, though, so your impact won’t be too significant.
Here’s a look at the chart:
2018 Tax Brackets
Here are the tax brackets in more detail.
Married Filing Jointly and Surviving Spouses
|Up to $19,050|
|Over $19,050 but not over $77,400|
|Over $77,400 but not over $156,150|
|Over $156,150 but not over $237,950|
|Over $237,950 but not over $424,950|
|Over $424,950 but not over $480,050|
Heads of Households
|Up to $13,600|
|Over $13,600 but not over $51,850|
|Over $51,850 but not over $133,850|
|Over $133,850 but not over $216,700|
|Over $216,700 but not over $424,950|
|Over $424,950 but not over $453,350|
Unmarried Individuals (other than Surviving Spouses and Heads of Households:
|Up to $9,525|
|Over $9,525 but not over $38,700|
|Over $38,700 but not over $93,700|
|Over $93,700 but not over $195,450|
|Over $195,450 but not over $424,950|
|Over $424,950 but not over $426,700|
Married Individuals Filing Separately:
|Up to $9,525|
|Over $9,525 but not over $38,700|
|Over $38,700 but not over $78,075|
|Over $78,075 but not over $118,975|
|Over $118,975 but not over $212,475|
|Over $212,475 but not over $240,025|
The most important thing to remember about these numbers is that they could still change if tax reform actually happens. If it doesn’t, however, you can count on the numbers above for 2018.
Another slight increase comes in the form of the standard deduction. But again, this isn’t a significant bump.
For 2018, single taxpayers and those who are married but filing separately can take a standard deduction of $6,500 (an increase from last year’s $6,350). Heads of household can take $9,550 (up from $9,350) and married couples filing jointly can take $13,000 (up from $12,700).
If you’re blind or older than 65, you can take an additional standard deduction of $1,300. If you’re unmarried, this additional deduction is $1,600.
This means that you can decrease the amount of income on which you pay taxes by this standard deduction. So, if you made $50,000 last year and are single, the standard deduction will decrease your taxable income down to $43,500.
After two years at $4,050, the personal exemption has increased to $4,150 for 2018. And just like the standard deduction above, the personal exemption means that you can earn even more money without owing income taxes on it.
However, the personal exemptions phase out beginning with a certain level of income. This means that if you make too much money, you won’t be able to take the full personal exemption on your earned income. This threshold begins at $266,700 for single filers, $160,000 for married filing separately, $320,000 for married filing jointly, and $293,550 for heads of household.
How to Calculate Your Taxes
While most of us simply plug our W-2 into TurboTax and let the computer do the thinking for us, it’s still important to at least know how tax brackets work.
For the sake of our example, let’s assume that you’re a single filer with an earned income of $110,650, and you don’t have any dependents. Take your income and subtract both your standard deduction and personal exemption, and you’re left with $100,000 in taxable income.
Now, apply your marginal tax rates.
Based on your first $9,525 of income, you’ll own 10% (for a total of $952.50 in taxes). For income dollars $9,526 through $38,700, you’ll owe 15% (for another $4,376.25). Then, for income dollars $38,701 through $93,700, you’ll pay 25% in taxes (adding up to another $13,750). This means that for your first $93,700 in income, you’ll pay a total of $19,078.75 in income taxes.
Now take the income left over ($6,300) and apply the next marginal tax rate of 28%. This will add another $1,764 to your tax bill. That means that for the year, you will pay a total of $20,842.75 in taxes on your total $110,650 earned.
For that level of income, your marginal tax rate ranged from 10% to 28%; however, your effective tax rate comes out to only 20.84% of your taxable income ($100,000). If you count it against your entire earned income ($110,650), though, you’re paying only 18.84% in taxes for the year.
You should also note that investment income can sometimes be taxed separately from, and at a lower interest rate than, earned income.
It’s interesting to look at these newly-released brackets, knowing that there’s a chance for tax reform. This would, of course, change everything shown here. If this happens, we will be sure to update you right away!
- Get your tax returns filed quickly, easily and inexpensively with TurboTax.