Recent publications
Home » Breaking News » Finance in 2018: tax cut, higher tax bill, nothing major is changing for Medicare

Finance in 2018: tax cut, higher tax bill, nothing major is changing for Medicare

iLawyerJan 9, 20183 8693 votes +3 rating

As we say goodbye to 2017, we look towards a year of increased uncertainty when it comes for your finances. Usually, the only things that change are the small things, often tied to inflation. But with tax reform, health care uncertainty, and other changes, this is shaping up to be a year where you should probably be on your toes.

© Article’s author: Ethan Wolff-Mann.
© Source: Yahoo Finance

How your finances will change in 2018So here’s what you should be looking out for in 2018:

Inflation adjustments

A few things were set to change in 2018 thanks to inflation adjustments. Tax-wise, the personal exemption was set to go up to $6,500 from $6,350 (to $13,000 from $12,700 for married couples). Other changes were set to be made to the alternative minimum tax, tax bracket boundaries, and tax credits like the earned income credit.

Top reaction from commentators on Yahoo Finance:

Why don’t these idiots like Ethan do some research on their own, instead of regurgitating other people’s stuff? First, the Tax Policy group, just as the Congressional Budget Office, is wrong far more than right. Lower to Middle income people will see a huge tax savings, as a % of taxes paid! If you pay $1,000 in taxes today, and you pay ZERO after the new plan, that is a 100% savings, yet idiots like Ethan say they only get a $1000 reduction in taxes. I have run the numbers with fictitious people, single, married, married with kids, etc, at various income levels, and if you are making 150k or lower, you will see substance all reductions in your taxes.

Now, I only looked at standard deduction folks, as most low to middle income people use this. As for health insurance, the only known is that Obamacare has, and continues to cost people thousands of dollars, and hurts the lower income people the most. Those that can’t afford insurance get hit with the penalty. (Regardless of what John Roberts calls nit, it is a penalty, not a tax) I did notice that Ethan forgot to mention that hundreds of thousands of people are finding work every month, and the forecasts say that will continue, thanks to President Trump, and this working are making more money. And there are far fewer illegals coming across the border to take your jobs.

The list is long, but there’s a great rundown from the Internal Revenue Service that you should scan. Of course, much of it could significantly change due to the tax bill, which has not been finalized by the House and Senate or signed by President Donald Trump.

The tax items for tax year 2018 of greatest interest to most taxpayers include the following dollar amounts (several items):

  • The standard deduction for married filing jointly rises to $13,000 for tax year 2018, up $300 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $6,500 in 2018, up from $6,350 in 2017, and for heads of households, the standard deduction will be $9,550 for tax year 2018, up from $9,350 for tax year 2017.
  • The personal exemption for tax year 2018 rises to $4,150, an increase of $100. The exemption is subject to a phase-out that begins with adjusted gross incomes of $266,700 ($320,000 for married couples filing jointly). It phases out completely at $389,200 ($442,500 for married couples filing jointly.)
  • For tax year 2018, the 39.6 percent tax rate affects single taxpayers whose income exceeds $426,700 ($480,050 for married taxpayers filing jointly), up from $418,400 and $470,700, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds for tax year 2018 are described in the revenue procedure.
  • The limitation for itemized deductions to be claimed on tax year 2018 returns of individuals begins with incomes of $266,700 or more ($320,000 for married couples filing jointly).
  • The Alternative Minimum Tax exemption amount for tax year 2018 is $55,400 and begins to phase out at $123,100 ($86,200, for married couples filing jointly for whom the exemption begins to phase out at $164,100). The 2017 exemption amount was $54,300 ($84,500 for married couples filing jointly). For tax year 2018, the 28 percent tax rate applies to taxpayers with taxable incomes above $191,500 ($95,750 for married individuals filing separately).
  • The tax year 2018 maximum Earned Income Credit amount is $6,444 for taxpayers filing jointly who have three or more qualifying children, up from a total of $6,318 for tax year 2017. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.

Your finances might have a few changes this coming year.

You may have a tax cut

The GOP’s tax bill is not very good for lower- or middle-income people in the next decade, but it will likely yield a tax cut for all tax brackets in 2018. According to the Tax Policy Center, a family earning an annual income of between $48,600 and $86,100 would get an annual federal tax cut of $830.

The House just passed a $1.5 trillion tax bill that’s brutal for poor people:

The Joint Committee on Taxation, Congress’s nonpartisan scorekeeper in tax matters, released its evaluation of the House GOP’s tax bill, which passed the House on Thursday, 227 to 205, with 13 Republicans joining every Democrat to vote against the bill.

Broadly, the “Tax Cuts and Jobs Act” delivers quick tax cuts across all income brackets in 2018. Over time, however, the tax cuts phase out for lower-income taxpayers. Taxpayers making under $75,000 a year could see tax increases of much as $300 by 2027, and those making under $30,000 would see hikes by 2021.

At the same time, wealthier families will continue to see tax cuts at the end of the decade, with returns of at least $1 million, averaging $8,871 by 2027. The bill also slashes the corporate tax rate to 20% from 35%. In total, the total tax cuts would reach almost $1.5 trillion over the next decade.

However, it’s hard to predict your tax bill. The tax plan is being rushed and is filled with glitches and loopholes, though GOP leaders have said they will iron it out in the conference committee when the House and Senate meet.

Top reaction from commentators on Yahoo Finance:

Trump administration continues to fight higher education because they claim they are the liberals. They are preparing us for their goal of a soviet style workforce of masters and peasants. They promised everyone a job and bread on the table but didn’t specify what kind of job and how much bread. They are removing all social programs because that money is going to oligarchs. Look at pictures of the inside of Trumps townhouse with all gold guilding. There should be a gold statue on the WH lawn soon and Trump will be wearing his 10 star general outfit... Get ready.

You also might have a much higher tax bill

These tax cuts may, however, be neutered for residents of higher-tax states. Your taxes also might change considerably if you’re a grad student. People who itemize deductions may find themselves paying more as many deductions have been struck from the new bill.

Top reaction from commentators on Yahoo Finance:

First of all, the writer of this article-Ethan Wolff-Mann, – is mistaken right at the beginning. It is NOT the Personal Exemption, it is the Standard Deduction that would be changing. The Personal Exemption, which last year was $4,050 would probably increase to $4,100, as it has been increasing by $50.00 yearly for several years. If this tax bill goes through as trump wants, then the Personal Exemption will be eliminated, which would actually reduce deductions for families of 5 or more people. I don’t see how this proposed tax bill is good for the hard working middle class.

Estate tax

The estate tax exemption stands to double if the tax bill is ironed out and signed by the president, which would allow $11 million to be exempted from taxation upon a death. While the previous $5.4 million exemption only touched about 5,200 families per year, this change will make it so that only the richest of the richest are taxed.

Top reaction from commentators on Yahoo Finance:

I’m still seeing comments regarding the estate tax and the destruction of family farms. This is a myth and deserves a challenge whenever it’s presented. Here is the TRUTH according to the US Department of Agriculture. This data is for 2016. Of all family farms where an estate was created (meaning someone died) 98.3% never even had to file an estate tax return. Of course that means that 1.7% DID file a return. Of those that did file a return only 0.4% (or 4/10th of 1%) actually had to pay any estate tax. In other words 99.6% of all family farms, where an estate was created (someone died) were liable for ABSOLUTELY NO ESTATE TAX in 2016. There is much more to this, such as how estate tax liability for family farms is indexed to inflation as of 2012 and how the tiny fraction of farms that did owe a tax (these are farms with income of $350,000 to $1 million or more) can pay the estate tax over time with very generous terms. “Save the farm, reform the estate tax” is a lie foisted on the public by people who have an interest in estate tax repeal. It’s nonsense.

Health care

There is a lot about health care that could change next year. The GOP tax bill removes the tax penalty associated with the Obamacare mandate, which may destabilize the marketplace as it’s considered one of the core pillars that keep the ACA afloat. For the millions of people who get care through the public marketplace, there is a significant amount of uncertainty. However, 2018 plans should be locked in this open enrollment.

Top reaction from commentators on Yahoo Finance:

Its not OK for Republicans to cut your taxes (even if it is only a $800. – thousands, however it is OK for Democrats to RAISE your taxes, Utility taxes, Water taxes, Gas taxes, Property taxes, Fast Food taxes, Cigarette taxes, Liquor taxes, and any tax they deem necessary all of course to pay their OVER Bloated Salaries and Pensions. Marxism leads to Communism which is what Democrats LIE to you about (Trump Russia Collusion when we all know it was Hitlery and Putin Collusion) but want implemented.

Medicare

Nothing major is changing for Medicare, but the tax bill may trigger significant automatic cuts in 2018.

House GOP tax plan triggers $25 billion in Medicare cuts:

The effects of this sequestration order would trigger automatic cuts to various programs, including Medicare. According to the CBO, this could be as much as 4% for Medicare, which amounts to $25 billion in 2018. Furthermore, all non-exempt programs would be eliminated, which include some farming subsidies, border security, and student loan help. Others, like Social Security, would remain untouched.

At the same time, the tax plan’s changes to the estate and gift taxes would cut revenue $151 billion from 2018 to 2027, according to the JCT. Only 4,700 estates were large enough to be subject to the estate tax as the 2017, since the exemption is over $5 million...

Touching Medicare has been traditionally considered explosive, and some have noted the “pay as you go” rules give Democrats leverage in the tax bill debates.

Social Security

Social Security payments will increase 2.0% for 2018, due to a standard cost-of-living adjustment. On average, this comes out to an average monthly increase of $27 per person. The full retirement age also gets extended by two months to 66 years and four months in 2018. So if you were born in 1956, it’s something to pay attention to.

The Full Retirement Age Is Increasing (source: “Social Security”, www.ssa.gov):

Full retirement age (also called “normal retirement age”) had been 65 for many years. However, beginning with people born in 1938 or later, that age gradually increases until it reaches 67 for people born after 1959.

The 1983 Social Security Amendments included a provision for raising the full retirement age beginning with people born in 1938 or later. Congress cited improvements in the health of older people and increases in average life expectancy as primary reasons for increasing the normal retirement age.

Top reaction from commentators on Yahoo Finance:

We don’t care what you say because you are always calling Armageddon. Now, no one believes you because, well, you are a liar that just screams into the air that the sky is falling. We experienced your 1% GDP growth and your trickle up economics. They failed miserably. Trump won 3,084 counties out of a total 3,141. Clinton wan 57. Wow! Do you know what that means. Oh, and he only spend 1/5 of what Clinton spent. Do you know what that means? You can’t get rid of him. You can’t replace him in 2020. You can’t subvert our will. Trump 2020 – MAGA.

Retirement savings increases

IRA contributions are staying put at $5,500, but 401(k) contribution limits are increasing by $500 in 2018 to $18,500.

Highlights of Changes for 2018 (source: “Internal Revenue Service”, www.irs.gov):

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2018:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $63,000 to $73,000, up from $62,000 to $72,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $101,000 to $121,000, up from $99,000 to $119,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $189,000 and $199,000, up from $186,000 and $196,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Top reaction from commentators on Yahoo Finance:

Nearly everyone in the working class and upper working class, and middle class will SEE a tax cut in 2018. How is that bad? Get real. I also see a lot of people on SSI and SSDI complaining about how they won’t see a substantial increase! (Not to be confused with Social Security Retirement benefits that people work and pay INTO all of their lives.) Again, get real. How can you REALLY complain when you get taxpayer-funded entitlements you didn’t EARN? It certainly isn’t Trump’s fault you landed in that situation. So whose fault is it?

3
0
0comments Add comment
Write a review
Your comment will be first!
Information
To add a comment to this publication, you need to register or Log In.

Read related articles

Breaking News
4 615 1
Final reform: U.S. Senate passed the biggest in history Tax Cut and Reform Bill

The Senate has passed Tax Reform to boost economy, help grow small business, and give our nation more energy independence. Americans have chosen jobs and wealth!

Breaking News
3 683 2
9 things about historic Tax Reform - Trump’s first big legislative win

A massive package of corporate and individual tax cuts, the repeal of the individual mandate and opening the Arctic National wildlife refuge for oil exploration.

Breaking News
4 175 3
Welfare reform: 6 million open jobs - the challenge is to get people back to work

Opinion: why the American welfare state is unsustainable? Nationwide spending on the program is $70 billion annually, 20% of which is wasted on junk food and sugary...

Devices / Gadgets
4 518 3
Shopping: iPhone X, Pixel 2 or Galaxy S8 - how each phone differs from one another

iOS or Android? If you’re shopping for a new smartphone, there’s a good chance three options come to mind: Apple iPhone X, Samsung Galaxy S8, Google Pixel 2.

Breaking News
4 784 3
Retail renaissance: Big Shopping Trends in 2018 - the signs are promising

2017 was the year of the retail apocalypse. Tech transformation. Retail is a people business. Predictions: pot, politics and Bitcoin. New business models will emerge.

Devices / Gadgets
4 736 4
Best cutting-edge products: the 10 most popular Gadgets of 2017

Technology companies like Microsoft, Samsung, Apple are constantly finding new ways to improve their cutting-edge products. There are several big changes in 2017.

Medicine / Health
1 215 5
Social media as a tool of mass impact: just remember 2016 US presidential election

Social media marketing and sales. How banks monitor customer social networks. Social networks have become platforms for spreading disinformation, fake news and targeted...

Devices / Gadgets
3 943 4
13 Cool Tech Gifts you must have and don’t have to spend a fortune on them

We have some real deals for less than $50. If you’re a generous type and have a big family or lot of friends, the holidays can be a financially taxing time.

With “Finance in 2018: tax cut, higher tax bill, nothing major is changing for Medicare” also read
Devices / Gadgets Apple admits: iPhone 6 started running slowly, and the battery drained quickly
3 794 3
What did Apple say about this? What happens to iPhone batteries when they get older? Is this the first time Apple has tweaked its software to boost battery life?
Breaking News “Star Wars” recovering? “The Last Jedi” has earned around $570m around the world
4 586 1
93% “fresh” and 8.1/10 critic ranking on Rotten Tomatoes. 86% score on Metacritic and a 7.9/10 user rating on IMDb. Film received an A (Cinemascore) and a 90 (comScore).
Devices / Gadgets Tips: How to Improve your iPhone Battery Life and Performance
4 062 5
The revelation would appear to lend weight to a popular conspiracy, though the tech giant says it throttles performance on the mobile phones as a precautionary measure.
Breaking News Holiday season: these 5 shopping hacks save you hundreds of dollars
4 000 4
Some go-to tricks. Here’s where Americans say they waste the most money. Sometimes shopping online can be much cheaper than shopping in a physical store.
Devices / Gadgets Motorola Moto Z2 Force is fighting for relevance in the high-end smartphone market
3 628 2
The Motorola’s latest effort takes many of features found in the original Z Force, such as Moto Mods add-ons and unbreakable screen, and further builds on them.
Devices / Gadgets What’s new in Apple iOS 13: major updates to the apps, Dark Mode, all-new Photos tab
1 237 5 12
Apple officially released iOS 13, the update will be available to all users gradually. iOS 13 is compatible with iPhone SE, iPhone 6s and later, seventh generation iPod Touch. The latest features.
Devices / Gadgets Review: Redmi Note 8 Pro - 6.5” screen, 6 GB of RAM and 4 cameras. The best smartphone in the segment?
1 599 2 6
The budget brand Redmi makes inexpensive hit phones at a bullet speed. The new Redmi Note 8 Pro will win the thrifty users who want everything, immediately and cheap. Read more in our extended review.
Benefits for your publications on our website
In the air: recent comments
2019-10-30, 3:02PM
I never wrote reviews, but now I really wanted to do it. I bought these headphones, I really like it so far. Noise reduction is really good, compared to the previous model, the sound is completely...Apple announces new AirPods Pro best-selling headphones with Active Noise Cancellation
2019-10-30, 2:39PM
The biggest drawback that I found for myself in the AirPods is the lack of multi-connection. The $160 headphone does not have the multiconnect that even Chinese QCY ($15) has. First, they connect to...Apple announces new AirPods Pro best-selling headphones with Active Noise Cancellation
2019-10-20, 7:22AM
The Google Pixel 4 facial recognition works even if you're asleep / dead. That seems problematic! The feature was reported by BBC News - their reporter Chris Fox clearly demonstrated blind...New Google Pixel 4 and Pixel 4 XL: it’s time to find out about the smartphones’ cost
2019-10-16, 12:22PM
Although I love the new design, hardware and features on the Apple Watch series 5... but since you keep saying there is no watch that comes even closer, I wanted to check on a few things. I have the...Innovative Apple Watch Series 5: new ultra-low-power LTPO display, Compass, Always On feature
2019-10-16, 11:41AM
Super pleased with my Apple Watch 4, but I will say it's very much directed towards fitness. I think we often forget that when smart watches first came out, there wasn't a general consensus...Innovative Apple Watch Series 5: new ultra-low-power LTPO display, Compass, Always On feature
2019-10-16, 11:37AM
Great review, I too have had many fitness watches over the years but once Watch was released that's all I have had everyday since Series 1. To putt it that's the only one I haven't...Innovative Apple Watch Series 5: new ultra-low-power LTPO display, Compass, Always On feature
Top comments
2019-09-24, 1:02PM
It is clear that if something is not in the iPhone, then this is not necessary, because Apple employees have already thought and decided for us. Of course, if tomorrow in iOS a full-screen incoming...These technologies and competitor features are still not available on the iPhone
2019-10-9, 7:30AM
If the number of "exotic features" on high-end phones guaranteed sales supremacy, Samsung would long ago have triumphed over Apple. Why in the world would stupid Korean consumers pay for...Extended review: iPhone 11 Pro really looks like the next generation of the device
2019-10-10, 6:40AM
Google has designed a 5G smartphone that will be released before Apple does. Google hopes to capture the smartphone market, or rather, its segment, which is now significantly influenced by Apple....New Google Pixel 4 and Pixel 4 XL: it’s time to find out about the smartphones’ cost
2019-10-8, 11:14AM
On the end of every Sony review, there is some kind of "this is a great phone to get, but there is Samsung...". Who cares if sammy phones are cheaper? Xperia lasts longer and it is better...Sony Xperia 5 review: compact version of Xperia 1, OLED HDR display and triple camera
2019-09-26, 10:50AM
For some reason, I didn't notice my friend updating most of the built-in applications when he had a Samsung Galaxy Note, services like Google Keep and Google Photo are updated, which on the...What’s new in Apple iOS 13: major updates to the apps, Dark Mode, all-new Photos tab
2019-10-3, 7:36AM
I would have gave it a pass if it had a non-foldable display. Seriously the tech behind these non-foldable displays is so bad and it has too many issues/breaking points. And tbh what would be the...Microsoft introduced the Surface Neo dual-screen device with a new Windows 10X
Most commented publications
Top publications
The most read of the month
Popular news topics
5G Android Apple beds device finance gadget gadgets Google Pixel 4 iPhone iPhone 11 iPhone 11 review mobile opinion politics reforms retail security shopping smart speaker smartphone tax reform taxes tech news technology