2019 Federal Income Tax Brackets for Your 2018 Returns

federal income tax brackets

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“Render unto Caesar….” This is a very common phrase, not only in the churches. And if you want to avoid being on the wrong side of the IRS come next year, then you should be fully aware of the new 2018 federal income tax brackets. In this case, the Internal Revenue Service (IRS) is our Caesar.

…. the things that are Caesar’s”. That is how the phrase goes, and some bit more of it. For starters, we all know that the IRS adjusts tax provisions to cater for the inflation rates on a yearly basis. It is a step that prevents people from getting pushed into higher income tax brackets.

Thanks to the 2017 Act on Tax Cuts and Jobs by President Trump, the IRS has used the Chained Consumer Price Index (C-CPI) to do the new income tax adjustments, credit values, and deductions amounts. Previously, Consumer Price Index (CPI) was used to calculate the inflation rate of the previous year to help change the income tax rackets accordingly.

So, to this end, we know that there are new tax thresholds that are applicable come 2019. We want you to be all set up to avoid accumulating penalties. Having the IRS on your back is the last thing you want! If you feel the need to get a professional to help you calculate your 2018 returns using the new tax rates, you can count on Turbo Tax.

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Updated Federal Income Tax Brackets

The table below will show you the new tax brackets for the 2018 returns, which should be filed by 15th April 2019.

Tax Rate (%) Taxable Income Bracket for Individuals ($) Taxable Income Bracket for Married Couples Filing Separately ($) Taxable Income Bracket for Married Couples Filing Jointly/ Widow(er) ($) Taxable Income Bracket for Head of Household
10 0 – 9,525 0 – 9,525 0 –19,050 0 – 13,600
12 9,526 – 38,700 9,526 – 38,700 19,051 – 77,400 13,601 – 51,800
22 $38,701 – $82,500 38,701 – 82,500 77,401 – 165,000 51,801 – 82,500
24 82,501 – 157,500 82,501 – 157,500 165,001 – 315,000 82,501 – 157,500
32 157,501 – 200,000 157,501 – 200,000 315,001 – 400,000 157,501 – 200,000
35 200,001 – 500,000 200,001 – 300,000 400,001 – 600,000 200,001 – 500,000
37 500,001 and above 300,001 and above 600,001 and above 500,001 and above

How it Works

Grab your calculators, ladies and gentlemen, and lets get cracking!

First, it is important to note that the Income-tax system of the United States is progressive. This means that individuals with higher income pay higher income tax rates and Vice Versa.

Let’s say you were earning $37,000 per annum and you are a single person. This means that you will file as a single person or an individual, which puts you in the 12% tax bracket category. However, you will not be paying the 12% on all of your $37,000 income. The first $9,525 of your income get taxed at 10% and everything else above that amount is what is taxed at 12%.

Another example; let’s say I was earning $83,000 per annum and I wanted to file as an individual. This leads me to the 24% tax bracket. The first $9,525 of my income will be taxed at 10%. This will leave me with $73,475 ($83,000 minus $9,525), where the income between $9,526 – 38,700 will be taxed at 12%. Then the income between $38,701 – $82,500 will be taxed at 22%, and the remaining $500 will be taxed at 24%.

It is important to note that these rates are only for the federal income tax brackets. It would be wise to confirm whether your state has different tax brackets, and what those rates are.

So, where do you belong? Once you have your income tax rate, the next thing is knowing about the deductions and personal exemptions.

Updated Deductions and Exemptions

In regards to tax exemptions, personal exemptions for 2019 are still eliminated. Deductions, on the other hand, will be as follows:

Filing Status Standard Deduction ($)
Individual/ Single 12,000
Married Couples Filing Jointly or Qualifying Widow(er) 24,000
Married Couples Filing Separately 12,000
Head of Household 18,000

In addition to this, there is an additional standard deduction for the elderly and blind taxpayers of $1,300. If such a tax payer happens to be single, that is unmarried, this amount shoots up to $1,600. This, of course, applies to the 2018 income tax returns, which will be filed in 2019.

Can You Get into a Lower Income Tax Bracket?

Yes! You can get into a lower income tax bracket, which means you will pay a lower federal taxable income. To achieve this, you have to take advantage of deductions and credits.

Tax deductions reduce the amount of your income that is subject to taxation i.e. they lower your taxable income by the percentage of your highest taxable income. For example, if you earn $39,000 and your total deductions are $1,000, this means that your tax bracket changes from 22% to 12%.

Why? Because your taxable income falls from $39,000 to $38,000 after deductions. To benefit from this, claim as many deductions as possible to help you reduce your taxable income. However, it is important to note that of the two tax deductions types, the standard deduction and itemized deductions, you can only use one.

On the other hand, tax credits do not alter your tax bracket. However, they will reduce the amount of tax payable.

Here is How to Cope with the New Rates

It’s not too early to plan yourself

Personally, I love planning myself in advance especially when it comes to the tax man. Were your 2017 returns in order? Or did you get slapped in the face with penalties and interests? If this is the case, finding a way to repay this and getting yourself on the good books of IRS will be a start- especially before you start filing for 2018 returns. If you have no idea where to start, well,  Fresh Start Initiative is at your service. If you got a refund, here are some ways to make good use of it. And if you get a refund come 2019, you can still use these ways.

Keep Calm!

Since the IRS has not released the new withholding tables, it will be very hard for your employer to comply at this time. Until the implementation in new withholding tables is done, employers will have to use the 2017 W-4 form. Due to this, it is highly likely that your January 2019 pay won’t have changed that much. This means that a huge chunk of your pay might be withheld. You just need to take a deep breath, keep calm and wait for the new withholding tables to be implemented for you to be certain of your withholdings.

Once this is done, you might see yourself taking home some extra bucks in 2019 due to lower tax rates. And if this is the case, do not forget we are all about saving and managing our personal finances for financial stability.

In Conclusion

Find out your new federal income tax brackets in advance so that you can plan yourself. File your 2018 returns before the Aril deadline. In case you need help to file or deal with tax debts, Turbo Tax and Fresh Start Initiative will help you tackle of those issues, and keep the IRS off your back!

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