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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.


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”,

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”,

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?

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