Inflation Adjustments for Some Tax Provisions for 2018

On October 19, 2017, the IRS released Revenue Procedure (Rev Proc) 2017-58 that details the annual inflation adjustments for over 50 of the sections of the Internal Revenue Code for tax years beginning in 2018.  A few of the most used are:

Estates and Gifts

The annual gift exclusion is increased from $14,000 to $15,000 per person per year.  This applies to cash gifts as well as property gifted to individuals or to trusts for the benefit of individuals.  Remember that certain amounts paid for the benefit of individuals are never subject to gift tax.  Expenses paid directly to an educational institution or medical facility are not considered a gift to the individual for whom it benefits. 

The lifetime estate/gift exclusion has been increased to $5,600,000 from $5,490,000 for estates of individuals who die in 2018.  A married couple can combine their estate exemption amounts and can transfer property up to $11,200,000 without incurring any transfer tax. 

Individual Income Tax

The tax bracketed income moved slightly but kept the same rates, and the increased standard deductions are shown below along with the amount of increase:

Status Standard Deduction Increase Amount
Married Filing Jointly $13,000 $300
Single $6,500 $150
Married Filing Separate $6,500 $150
Head of Household $9,550 $200

If an individual can be claimed as a dependent, their standard deduction cannot exceed $1050 or the sum of $350 plus the dependent’s earned income.

The personal exemption is increased by $100 to $4,150 but is phased out with adjusted gross income of $266,700 or $320,000 for married couples filing jointly; and is completely phased out at $389,200 or $442,500 for married couples filing jointly.

The phaseout of itemized deductions begins with an adjusted gross income of $320,000 for a married filing joint return, $266,700 for single, and $160,000 for married filing separately.

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