In 2017, Congress passed the most significant tax reform since 1986. A specific change to the law is in the Marginal Tax Brackets, or what most people call “Tax Brackets.” Tax brackets are ranges of incomes taxed at a given rate. The new tax bracket rates came into effect on January 1, 2018 and guess what? We recommend sitting down for this one because….. 5 of the 7 brackets are LOWER than previous years’! Yes, you read that right; Congress actually made most of the brackets lower.
Let’s take a look at the old income tax brackets so that we can compare the two:
|
Tax Rate |
Single | Married Filing Jointly/Widow | Married Filing Separately |
Head of Household |
|
10% |
$0 – 9,325 | $0 – $18,650 | $0-9,325 |
$0 – $13,350 |
|
15% |
$9,326 – $37,950 | $18,651 – $75,900 | $9,326 – $37,950 |
$13,351 – $50,801 |
|
25% |
$37,951 – $91,990 | $75,901 – $153,100 | $37,951 – $76,550 |
$50,802 – $131,200 |
|
28% |
$91,901 – $191,650 | $153,101 – $233,350 | $76,551 – $116,675 |
$131,201 – $212,500 |
|
33% |
$191,651 – $416,700 | $233,351 – $416,700 | $116,676 – $208,350 |
$212,501 – $416,700 |
|
35% |
$416,701 – $418,400 | $416,701 – $470,700 | $208,351 – $235,350 | $416,701 – $444,550 |
| 39.6% | $418,401 + | $470,701 + | $235,351 + |
$445,551 + |
Now, let’s take a look at the new brackets:
| Tax Rate | Single | Married Filing Jointly/Widow | Married Filing Separately |
Head of Household |
|
10% |
0 – $9,525 | 0 – $19,050 | 0 – $9,525 |
0 – $13,600 |
|
12% |
$9,526 – $38,700 | $19,051 – $77,400 | $9,526 – $38,700 |
$13,601 – $51,800 |
|
22% |
$38,701 – $82,500 | $77,401 – $165,000 | $38,701 – $82,500 |
$51,801 – $82,500 |
|
24% |
$82,501 – $157,500 | $165,001 – $315,000 | $82,501 – $157,500 | $82,501 – $157,500 |
| 32% | $157,501 – $200,000 | $315,501 – $400,000 | $157,501 – $200,000 |
$157,501 – $200,000 |
|
35% |
$200,001 – $500,000 | $400,001 – $600,000 | $200,001 – $300,000 | $200,001 – $500,000 |
| 37% | $500,001 + | $601,00 + | $300,001 + |
$500,001 + |
Did you fall asleep reading those? We don’t blame you. Luckily, our accountants have you covered. Here’s an example we put together of a married couple filing jointly with a combined taxable income of $85,000:
| Tax Year | 2017 | VS |
2018 |
|
Filing Status |
Married Filing Jointly |
Married Filing Jointly |
|
| Taxable Income | $85,000 |
$85,000 |
|
| Total Tax | $12,727 |
$10,579 |
That is a total savings of $2,148! Whether you agree or disagree with the new tax plan, we know you can’t disagree with more money in your pocket! There are some other changes to the new law that we will discuss in future correspondences, so be on the lookout for those and ensure you subscribe to our mailing list so that the latest news is delivered directly to your inbox. We have also included the detailed brackets below so that you can look up your specific bracket and see how much you will save in the 2018 tax year.
2017 Tax Brackets 2018 Tax Brackets
Do you want to see the actual difference in your tax liability before it’s time to file? We offer both personal and corporate income tax projections, which allow us to project your tax liability for the year. This service will help you prepare for (and potentially reduce) your tax liability, and show you the difference between your 2017 and 2018 tax liabilities. This is a great step towards financial preparedness and we find this service to be highly beneficial to our clients.
We understand that taxes are confusing and that you probably have a lot of questions about this. Please don’t hesitate to give us a call at 813-514-8273 to schedule an appointment with one of our tax professionals. As always, we appreciate your business and your loyalty.
