May 22, 2018
Today is the beginning of our tax tip Tuesday’s. For the next several months we discuss changes in the 2018 tax laws and how will affect you as an individual taxpayer. In today’s overview, we will discuss the basics, the change in tax rates and the change in standard deductions.
But first, taxable income vs. gross income. When many of us look at a tax table we see it from the perspective how much we earn (gross income) rather than taxable income. Your taxable income is your gross income, less personal exemptions, and standard deductions. For example, if you are a married couple filing a joint return and your combined income is $100,000 and look at the tax table below, you may assume marginal tax rate is 22%. Your actual taxable income would be $71,850 ($100,000 less personal exemptions of $4,150 and $24,000 in standard deductions), putting you in the 12% tax bracket. Under the previous rules, your taxable income would have been $82,000 and you would have fallen into the 25% tax bracket.
On the upper end of the tax rates, the highest rate of 39.6% was reduced to 37% and is accessed on couples with taxable income in excess of $600,000 rather than the lower taxable of $480,050. A couple with taxable income of $500,000 will pay $175,000 in taxes, while under the old law their tax liability is $198,000, a savings of $23,000.
Below are the new tax rate table, the old tax rate table, and a table showing the change in standard deductions. Next week we will discuss changes in income classifications.
New Rate Table
| Marginal Tax Rate | Single | Married Filing Jointly | Head of Household | Married Filing Separately |
| 10% | $0-$9,525 | $0-$19,050 | $0-$13,600 | $0-$9,525 |
| 12% | $9,525-$38,700 | $19,050-$77,400 | $13,600-$51,800 | $9,525-$38,700 |
| 22% | $38,700-$82,500 | $77,400-$165,000 | $51,800-$82,500 | $38,700-$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-$500,000 | $200,000-$300,000 |
| 37% | Over $500,000 | Over $600,000 | Over $500,000 | Over $300,000 |
Previous Rate Table
| Marginal Tax Rate | Single | Married Filing Jointly | Head of Household | Married Filing Separately |
| 10% | $0-$9,525 | $0-$19,050 | $0-$13,600 | $0-$9,525 |
| 15% | $9,525-$38,700 | $19,050-$77,400 | $13,600-$51,850 | $9,525-$38,700 |
| 25% | $38,700-$93,700 | $77,400-$156,150 | $51,850-$133,850 | $38,700-$78,075 |
| 28% | $93,700-$195,450 | $156,150-$237,950 | $133,850-$216,700 | $78,075-$118,975 |
| 33% | $195,450-$424,950 | $237,950-$424,950 | $216,700-$424,950 | $118,975-$212,475 |
| 35% | $424,950-$426,700 | $424,950-$480,050 | $424,950-$453,350 | $212,475-$240,025 |
| 39.6% | Over $426,700 | Over $480,050 | Over $453,350 | Over $240,025 |
Standard Deductions Comparison
| Tax Filing Status | Previous Standard Deduction (Set to Take Effect in 2018) | New Standard Deduction |
| Single | $6,500 | $12,000 |
| Married Filing Jointly | $13,000 | $24,000 |
| Married Filing Separately | $6,500 | $12,000 |
| Head of household | $9,350 | $18,000 |
Blaine La/Car Associates 