2018 Tax Brackets
2018 Tax Brackets are going to be vastly different from 2017. You really need to understand how the brackets work in order to do your best planning.
The first thing to understand is the difference between Total Income, Adjusted Gross Income and Taxable Income.
I can not stress this enough, your tax bracket is based on you TAXABLE INCOME! That is the amount of money you have after you factor in all your income and subtract any deductions and/or exemptions.
Your total income is line 43 on page 2 of your 1040. Your adjusted gross income is line 37 on page 1 of your 1040.
The difference between the two is for your itemized or standard deductions. Standard deductions GREATLY increased with the new tax law. k per person under 65 and ,300 per person 65 and over.
Now, the difference between your total income and your adjusted gross income, all on page 1 of the 1040 is the amount you were able to deduct “above the line”.
Above the line deductions are deductions you can take EVEN if you don’t itemize. IRA contributions, some teacher expenses, health expenses etc. You can take these deductions even if your standard deduction is larger than your itemized deductions.
Thus above the line deductions are more valuable than regular deductions. Makes perfect sense, right!!!
Well guess what? In 2019 the whole 1040 that we’ve all grown to know and love will change. Purportedly it will become “simpler”.
We will see. So, don’t tattoo these line items on your forearm yet. Just remember for 2018 and maybe no more , these are the tax brackets and may change.
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