IRS issues 2018 inflation adjustments

The IRS has released some inflation-adjusted figures for 2018.

Standard deductions

The 2018 standard deduction will increase to $6,500 for single taxpayers. For married joint filers, the standard deduction will increase to $13,000. For heads of household, the standard deduction will increase to $9,550.
The additional standard deduction for the blind and aged will increase to $1,300 for married taxpayers. For unmarried taxpayers, the amount of the additional standard deduction will increase to $1,600.

Limitation on itemized deductions

For higher income taxpayers who itemize their deductions, the limitation on itemized deductions will be imposed at income above levels:

  • For married couples filing joint returns or surviving spouses, the income threshold will be $320,000.
  • For heads of household, the threshold will be $293,350.
  • For single taxpayers, the threshold will be $266,700.
  • For married taxpayers filing separate returns, the threshold will be $160,000.

Personal exemption

The 2018 personal exemption will be $4,150.

Adoption credit

The 2018 adoption credit will be $13,840.

Qualified transportation fringe benefits

For taxable years beginning in 2018, the monthly limitation under Code Sec. 132(f)(2)(A) regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $260. The monthly limitation under §132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking will be $260.

Flexible spending arrangements

The limitation on the amount of salary reductions an employee may elect to contribute to a cafeteria plan under an FSA will be $2,650.

Medical savings accounts

Medical savings accounts are available to certain employees of small businesses only when used in conjunction with a “high deductible health plan” whose deductibles are indexed for inflation. For 2018, for individual coverage, the deductible must range from $2,300 to $3,450 with an out-of-pocket maximum of $4,600. For family coverage, the deductible range is $4,600 to $6,850 with an out-of-pocket maximum of $8,400.

Foreign earned income exclusion

The foreign earned income exclusion amount was adjusted for 2018 to $104,100.

Pipeline construction

For calendar year 2018, an eligible employer may pay certain welders and heavy equipment mechanics an amount of up to $18 per hour for rig-related expenses that is deemed substantiated under an accountable plan if paid in accordance with Rev. Proc. 2002-41, 2002-1 C.B. 1098. If the employer provides fuel or otherwise reimburses fuel expenses, up to $11 per hour is deemed substantiated if paid under Rev. Proc. 2002-41. (IRS News Release IR-2017-178, October 29, 2017; IRS Rev. Proc. 2017-58, IRB 2017-45, November 6, 2017.)

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