At the very end of 2017, a new tax bill was passed that has brought significant changes to the 2018 tax code. Most of these changes won’t impact the taxes you file this spring, but that doesn’t mean you should ignore them until next year. Understanding what has changed and what it could mean for your tax liability is an important aspect of your financial planning this year.
One of the most impactful changes brought about by the new tax rules has to do with the revised 2018 tax brackets. There are still seven brackets, but the tax rates and income level of each bracket have changed.
2018 Tax Brackets: What’s New?
To see the tax bracket changes more clearly, let’s look at a few of the brackets and rates for married taxpayers filing jointly. In 2017, the first four tax brackets looked like this:
- Bracket one: $0-$18,650, taxed at 10%
- Bracket two: $18,651-$75,900, taxed at 15%
- Bracket three: $75,901-$153,100, taxed at 25%
- Bracket four: $153,101-$233,350, taxed at 28%
In 2018, those first four brackets are quite different:
- Bracket one: $0-$19,050, taxed at 10%
- Bracket two: $19,051-$77,400, taxed at 12%
- Bracket three: $77,401-$165,000, taxed at 22%
- Bracket four: $165,001-$315,000, taxed at 24%
What Do 2018 Changes Mean?
From this data we can see that the 2018 tax brackets enact two major trends. First of all, the cap for most of the income brackets is higher than in 2017. Secondly, the tax rates for most brackets are lower. In a big-picture sense, this means that a greater amount of a taxpayer’s income will be taxed at a lower rate.
In many cases this may mean that your overall tax liability is lowered. Every case is different, though, because you still have to factor in all of the other elements of your financial situation. To determine what these updated tax brackets mean for you individually, give the team at Taxation Solutions, Inc. a call. We are your resource in Austin for tax planning assistance. Contact our team today to set up an appointment!