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Tax Bill 2018 – Recent Changes That Will Impact You

Last Update Date : April 29, 2019
Estimated Read Time: 5 min

US Tax Bill 2018

When planning out a monthly/yearly budget for your household, the planning of expenses, expected and unexpected expenses, the available income to meet the needs and wants of the people in the family can be task that may take you one day or several days. When it comes to planning the nation’s needs, wants, expenses and available funds (from taxes collected from the residents of the country), the task is even more daunting. The new tax bill of 2018 has been updated to reflect the everchanging needs of the people, which will be discussed in this guide.

Changes in Tax Bill 2018

The Tax Bill, previously known as the Tax Cuts and Jobs Act, will be applicable for the 2018 taxes that will be filed next year. The changes to the new tax bill are as follows:

Tax Rates and Brackets

2017 Tax Rates and Brackets

Marginal Tax RateSingleMarried and Filing JointlyMarried Filing SeparatelyHead 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 – $50,800
25%$37,951 – $91,900$75,901 – $153,100$37,951 – $76,550$50,801 – $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%Over $418,400Over $470,700Over $235,350Over $444,550

2018 Tax Rates and Brackets

Marginal Tax RateSingleMarried and Filing JointlyMarried Filing SeparatelyHead of Household
10%$0 – $9,525$0 – $19,050$0 – $9,525$0 – $13,600
15%$9,525 – $38,700$19,050 – $77,400$9,525 – $38,700$13,600 – $51,850
22%$38,700 – $82,500$77,400 – $165,000$38,700 – $82,500$51,850 – $82,500
24%$82,500 – $157,500$165,000 – $315,000$82,500 – $157,500$82,500 – $157,500
32%$157,500 – $200,000$315,000 – $400,000$157,500 – $200,000$157,500 – $200,000
35%$200,000 – $500,000$400,000 – $600,000$200,000 – $300,000$200,000 – $500,000
37%Over $500,000Over $600,000Over $300,000Over $500,000

To understand how the changes to the marginal tax rates are applied, below is an example of how taxes would be deducted for an individual.

An Example of New Tax Rates Applied

2018 Marginal Tax RatesSingle Tax BracketIncome  Tax Deducted
10%$0 – $9,525(9525-0) = $9525  953
12%$9,525 – $38,700(38700-9525) = $29175 $3,501
22%$38,700 – $82,500(82500-38700) = $43800 $9,636
24%$82,500 – $157,500(110000-82500) = $27500 $6,600
32%$157,500 – $200,000NA NA
35%$200,000 – $500,000NA NA
37%Over $500,000NA NA
Total Tax Payable   $ 20,690

Changes Affecting Homeowners

The new bill has changed existing provisions available for homeowners, which has left frowns on many faces. The reason being, the existing $1,000,000 deductible on the principal on the mortgage of first and/or second home has been reduced to $750,000. Additionally, the deductible on interest paid on home equity of up to $100,000 has been entirely eliminated.

Changes To Medical Deductions/Expenses

Previously, the medical expenses deductions allowed was 10% of an individual’s Adjusted Gross Income (AGI). However, for 2018 tax filing, the new reduced limit is 7.5%.

However, Obamacare or the Affordable Care Act remains unchanged, with the exception of a slight change. The mandate penalty has been removed for people who opt to not buy healthcare. But this comes into effect only for 2018 tax filing.

Child Tax Credit and 529

As per the new law, parents can now avail double the amount in Child Tax Credit(CTC), as it has been raised from $1000 to $2000 for 2018 and also increases the amount of the credit that is refundable to $1,400. The table below reflects the changes:

Filing Status2017 CTC Threshold2018 CTC Threshold
Married Filing Jointly$110,000$400,000


Previously, the 529 was used as a college savings plan by many parents. The new bill has made significant changes to this scheme, as it can now be used for all levels of education other than college. For example, for children attending private schools, the money from your 529 can be used to bear the expenses, tax free. However, to ensure your tax savings do not get affected adversely, before opting to withdraw from your 529 a tax expert should be consulted.

Standard Deductions and Personal Exemption

The 2018 tax bill has removed the personal exemption limit, however, there is no reason to worry as the standard deduction has nearly doubled. So, an individual earning $75,000 when filing their 2018 return can automatically deduct $12,000 from their income, lowering their taxable income to $63,000. If you compare this with the previous rates, which allowed only for a total of $10,400, making the taxable income of $64,600. So, the new standard deduction helps the taxpayer by leaving more money in his/her pocket.

Filing Status2017 Standard Deduction2018 Standard Deduction2017 Personal Exemption2018 Personal Exemption


Married Filing Jointly$12,700$24,000$4,050N/A
Married Filing Seperately$6,350$12,000$4,050N/A
Head of Household$9,350$18,000$4,050N/A

For 2018, the additional standard deduction amount for the aged or the blind is $1,300. The additional standard deduction amount increases to $1,600 for unmarried taxpayers.

Charitable Donations

Another positive reform in the new 2018 tax bill, from 2018 onwards 60% of your income can be used to donate to recognized charities and claim the deductions.

Alternative Minimum Tax

The Alternative Minimum Tax (AMT) ensures the right amount of taxes is paid by the top income earners. Upper income group individuals can determine the taxes owed in one of two ways:

  • Traditional tax rates
  • AMT tax rates

The lesser amount calculated based on the two methods will be the tax payable. While the calculating AMT is a complex process, the tax rates are simple – 26% or 28%. The exemption limit to AMT for 2018 is:

Person2017 Exemption2018 Exemption
Single/Head of household$54,300$70,300
Married filing jointly$84,500$109,400
Married Filing Seperately$42,250$54,700

Once the taxes payable is determined, the above exemption limits can be applied. The threshold limit has also been increased to $500,000 for individuals and $1,000,000 for married joint filers.

SALT Deductions

State and Local Taxes (SALT), held no limitation for deductions previously, however the new tax bill sets the deductible limit to $10,000. ($5,000 for married taxpayers filing separately). Foreign real estate property taxes may not be deducted under this exception.

Estate Tax

The new exemption limit gives reason to cheer for individuals inheriting property or money. At present, if the value of any inheritance was over $5.49 million, 40% taxes was due. However, the raised exemption limits are:

  1. Individuals – $11,200,000
  2. Married – $22,400,000

Foreign Earned Income Exclusion

For tax year 2018, the foreign earned income exclusion is $103,900, up from $102,100 for tax year 2017.

Removed Deductions

The following deductions have been removed in the new tax bill:

  • Alimony
  • Moving Expenses
  • Transportation reimbursement
  • Subsidized parking by employer
  • Tax preparation
  • Casualty and theft losses
  • Un-reimbursed employee expenses

While the changes implemented by the 2018 tax bill will not affect taxpayers with this year’s filing, it will be important to remember and implement the changes when filing your 2018 tax return.

How can H&R Block help you?

H&R Block is the global leader in the Income Tax filing services domain. Get your U.S. Expat tax filing done by our tax experts who will help you understand your tax modalities, prepare your return and file it online.

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Anshu Jain
Anshu Jain is the Manager, Offshore Operations at H&R Block (India). She holds an MBA in Finance and has an experience of over ten years in business operations, U.S. tax advisory and program management. When she is not working, Anshu enjoys reading and writing about U.S. taxation.

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