In the tax year 2018 Internal Revenue Service (IRS) announced few more tax benefits. Some Tax rates had increased moderately because of the blowing up modifications and others are remained unchanged. Tax rates for 50 tax provisions had changed due to the annual inflation adjustments. The details about the annual adjustments are given in the revenue procedures.
Standard deduction amounts for Married filing jointly is increased to $13,000 and for Married filing separately is increased to $6,500.The standard deduction amount of heads households is increased to $9,550.
Personal Tax Exemption
Personal tax exemption is modified for each year according to the inflation. These amounts for the year 2018 is Increased to $4150 which was an increase of $100 to the previous year amount. Personal exemption phase out amount depends on the AGI. When AGI amount increases it begins to phase out. The starting phase out is $266,700 and the ending phase out is $389,200. Similarly, the starting phase out for married couples filing jointly is 320,000 and the ending phase out is 442,500.
According to the act of tax cuts and jobs personal exemption is eliminated. This will decrease the tax file returned by individuals in the year 2021 through 2025.
Taxpayers are allowed to apply personal tax exemption up to 4050 if they are married filing jointly. The elimination of personal tax exemption for 2021 through 2025 is the important factor to be considered while calculating the taxes for an individual. The results of Internal Revenue Service announcement includes the advantages of suspending the personal tax exemption but the standard deduction amounts doubles up to the previous year.
The individual taxpayers are affected by the 39.6 tax rates. The individuals whose total income are higher than 426,700 must file a return which is the increase of 8300 from the previous year. The married filing jointly whose income are higher than 442,500 must file a return which is the increase of 9800 from the previous year. The other increased percentage and marginal rates are explained in the revenue table procedures.
The effect of individuals by the increased in deduction amount is compensated by the elimination of personal exemption tax which is claimed as 0, exceptional of increase to 100 in some cases.
The itemized deductions for an individual are raised to 266,700 and for married filing jointly are increased to 320,000.The alternative minimum tax exemption was 5,5400 and it begins to phase out at 123,100 which is the increase of 1100 from the previous year. The exemption for married filing jointly is 86,200 and it started to phase out at 164,100 which is the increase of 9550 from the previous year. The taxpayers whose income are above 191,500 are applicable to pay 28% of the tax rates.
The suspension of personal tax exemption in the year 2018 added the advantages for individual shareholders, investors, religious and non profitable organizations. The personal tax exemption has been increased over a period of years which has been eliminated in the 2018 year. It helps in increase the liability of Tax for the taxpayers.
This Exemption are subtracted from adjustable gross income which helps the taxpayers to hold the income with themselves.
The personal Exemption for the year 2020-2021 is applicable to,
- Married couples who file a return separately,
- Spouse who is not dependent each other,
for example divorcees.
- The spouse who has no gross income,
- Two personal Exemption also can be applied for the married couples who file a return jointly.