Inflation-adjusted tax rates predicted for 2018

Register now

Tax reform notwithstanding, the tax research providers Bloomberg BNA and Thomson Reuters both released their predictions Thursday for the annual inflation-adjusted tax rates that the Internal Revenue Service is likely to announce in the coming weeks.

The projected tax rates are based on changes in the consumer price index that were also released Thursday by the U.S. Bureau of Labor Statistics. The projections aim to provide early notice to practitioners of the amount of tax savings that will be realized by taxpayers as a result of increases to standard deduction amounts, upward adjustments to tax brackets, and increases in hundreds of other key thresholds.

Bloomberg BNA projects that for high-income taxpayers, the top 39.6 percent tax bracket will begin at $480,050 for married taxpayers filing joint returns and at $426,700 for unmarried individuals in 2018, an increase from $470,700 and $418,400, respectively, in 2017.

Most taxpayers are entitled to claim a personal exemption for each member of their household. For 2018, the personal exemption amount is projected to increase slightly from $4,050 to $4,150. The personal exemption is phased out for high-income taxpayers. The projected phase-out levels are spelled out in the full report. It also projects the standard deduction amounts for 2018 will increase slightly to $13,000 for joint filers and surviving spouses, $9,550 for heads of households, and $6,500 for all other taxpayers. For 2018, Bloomberg BNA forecasts the first increase in the annual gift tax exclusion in five years, from $14,000 to $15,000. Bloomberg BNA’s report is available at

“While the IRS won’t announce the inflation adjustments for next year for some time, our projections help taxpayers and tax planners get a jump start on the 2018 tax planning season by allowing them to more accurately estimate their tax liabilities for the upcoming year,” said Bloomberg BNA Tax & Accounting editorial director George Farrah in a statement. “As part of their 2017 year-end review, taxpayers should evaluate their wealth transfer strategies to fully utilize the higher exclusion in 2018. Many taxpayers will slip into a lower tax rate in 2018 because of increases in the tax brackets. The standard deduction and personal exemption amounts will also increase, offering tax relief to many taxpayers due to inflation.”

Thomson Reuters also released its projections, predicting the starting point for phasing out of taxpayers’ personal exemptions will range from $320,000 for spouses filing jointly/surviving spouses and $293,350 for heads of household to $266,700 for single taxpayers.

The same higher dollar thresholds will apply to the phaseout of itemized deductions. That’s compared to this year, when phaseouts began at $313,800 of adjusted gross income for joint filers, $287,650 for heads of household, and $261,500 for singles. The higher phaseout levels prevent inflation from eating into the value of these deductions. The report is available for download from the Thomson Reuters Tax & Accounting website.

“With the strong possibility of tax reform―and the accompanying uncertainties as to what such legislation may encompass―it may be especially difficult to plan for the 2018 tax year,” said Salim Sunderji, managing director, Checkpoint, with the Thomson Reuters Tax & Accounting business, in a statement. “What is certain is that tax practitioners not only need to stay on top of potential changes but also must know where their clients will stand under current law. With the projections in this report, practitioners have a clearer picture of what 2018 may bring and can begin strategizing in earnest.”

For reprint and licensing requests for this article, click here.
Tax rates Tax planning IRS Bloomberg Thomson Reuters