Every year, the Internal Revenue Service announces cost-of-living adjustments that affect contribution limits for retirement plans, thresholds for deductions and credits, and standard deduction and personal exemption amounts. Here are a few of the key adjustments for 2018.

Employer retirement plans

  • Employees who participate in 401(k), 403(b), and most 457 plans can defer up to $18,500 in compensation in 2018 (up from $18,000 in 2017); employees age 50 and older can defer up to an additional $6,000 in 2018 (the same as in 2017).
  • Employees participating in a SIMPLE retirement plan can defer up to $12,500 in 2018 (the same as in 2017), and employees age 50 and older can defer up to an additional $3,000 in 2018 (the same as in 2017).

IRAs

The limit on annual contributions to an IRA remains unchanged at $5,500 in 2018, with individuals age 50 and older able to contribute an additional $1,000. For individuals who are covered by a workplace retirement plan, the deduction for contributions to a traditional IRA is phased out for the following modified adjusted gross income (AGI) ranges:

2017

2018

Single/head of household (HOH)

$62,000 - $72,000

$63,000 - $73,000

Married filing jointly (MFJ)

$99,000 - $119,000

$101,000 - $121,000

Married filing separately (MFS)

$0 - $10,000

$0 - $10,000

The 2018 phaseout range is $189,000 - $199,000 (up from $186,000 - $196,000 in 2017) when the individual making the IRA contribution is not covered by a workplace retirement plan but is filing jointly with a spouse who is covered.

The modified AGI phaseout ranges for individuals to make contributions to a Roth IRA are:

2017

2018

Single/HOH

$118,000 - $133,000

$120,000 - $135,000

MFJ

$186,000 - $196,000

$189,000 - $199,000

MFS

$0 - $10,000

$0 - $10,000

Estate and gift tax

  • The annual gift tax exclusion for 2018 is $15,000, up from $14,000 in 2017.
  • The gift and estate tax basic exclusion amount for 2018 is $5,600,000, up from $5,490,000 in 2017.

Personal exemption

The personal exemption amount for 2018 is $4,150, up from $4,050 in 2017. For 2018, personal exemptions begin to phase out once AGI exceeds $266,700 (single), $293,350 (HOH), $320,000 (MFJ), or $160,000 (MFS).

These same AGI thresholds apply in determining if itemized deductions may be limited. The corresponding 2017 threshold amounts were $261,500 (single), $287,650 (HOH), $313,800 (MFJ), or $156,900 (MFS).

Standard deduction

These amounts have been adjusted as follows:

2017

2018

Single

$6,350

$6,500

HOH

$9,350

$9,550

MFJ

$12,700

$13,000

MFS

$6,350

$6,500

The 2018 additional standard deduction amount (age 65 or older, or blind) is $1,600 (up from $1,550 in 2017) for single/HOH or $1,300 (up from $1,250 in 2017) for all other filing statuses. Special rules apply if you can be claimed as a dependent by another taxpayer.

Alternative minimum tax (AMT)

2017

2018

Maximum AMT exemption amount

Single/HOH

$54,300

$55,400

MFJ

$84,500

$86,200

MFS

$42,250

$43,100

Exemption phaseout threshold

Single/HOH

$120,700

$123,100

MFJ

$160,900

$164,100

MFS

$80,450

$82,050

26% on AMTI* up to this amount, 28% on AMTI above this amount

MFS

$93,900

$95,750

All others

$187,800

$191,500

*Alternative minimum taxable income

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Redwood Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union Members.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018.