tax rate overview

The effective rate of federal tax on income ranges from 0% to 56% for the tax year 2017. For 2018, the top effective rate is reduced to just over 53%. •  Contribution Tax onnetinvestmentincome)are: The most common federal tax rates (exclusive of the Medicare •  •  •  •  •  •  •  •  •  •  including: many factors, a rate of approximately depending on 56% in in 2018) (53% 2017 from notaxatallto you receive from yourdeductions—canvary The rateof taxyoupayonyourincome—aswellthebenefit adjusted forinflationinthefuture. withincomebelow$418,400in2017.Theseamountsare taxpayers with taxable income below $470,700 in2017andsingle taxpayers Bush-era tax cuts were extended and made permanent for married As aresult of theAmericanTaxpayer Relief Actof 2012(“ATRA”), the taxpayers. $479,000 formarriedfilingjointand$425,800 forsingleindividual dividends are with applicable taxable toincome taxpayers over the20% tax ratefornet long-termFor 2018, gainsandqualified filers). forsingle ($418,400 $470,700 over income taxable with 2017 inthe39.6%taxbracket,suchasformarriedtaxpayers taxpayers 20% fornetlong-term capitalgainsandqualifieddividendsfor Are credits availabletooffset yourtax? base? Is any of your income eligible to be excluded from your taxable 1,2018 throughrepealed December31, 2025. from January a result of theTax exemptionsare CutsandJobsAct,personal areFor 2017, exemptionsbeingphasedout? yourpersonal As 2018 through December31,2025. Tax Cuts andJobsAct, these itemsare1, suspended from January and totalitemizeddeductionsare beinglimited? As aresult of the For 2017,howmuchof yourmiscellaneousitemizeddeductions Is anyof yourincomesubjecttoself-employment tax? Are yousubjecttotheMedicare Wage Surcharge? income? Are yousubjecttotheMedicare ContributionTax onnetinvestment Are yousubjecttotheAMT? rate becauseof nettingrules? Are youlosingtheadvantageof thelowerlong-term capital gains dividend incomeornetlong-term capitalgainincome? qualifying the natureis income, What of ordinary Is it income? your • •  •  •  income. Buthere are thebasicrules: is in discussed dividend and detail capital on chapter the in gains income. This to be taxed at lower maximum tax rates than ordinary Long-term capital gains and qualified dividend income are eligible 2018 formarriedfilingjointlyandsingletaxpayers. and incomein2017 the different taxbracketsthatapplytoordinary 1 shows investment income. For 2018, this rate drops to 40.8%. Chart high as43.4%, inclusiveof theMedicare Contribution Tax onnet incomeand,therefore, couldbetaxedatarateas as ordinary For 2017, net short-term capital gains are subject to the same rate or Scorporation. LLC income passingthrough to youfromordinary apartnership, Social Securitybenefits,alimony, andyourdistributiveshare of income, taxable retirement plan distributions, rental income, taxable dividend interestemployment income, income,nonqualifying andself- incomeprimarilyincludeswages,business Ordinary CAPITAL GAIN AND DIVIDEND INCOME RATES ORDINARY INCOME RATES Additional Medicare Tax (orHospitalInsuranceTax) paidbythose is 2.9% of all self-employment income. Also, there is another 0.9% all incomeearned foremployees.Fortheself-employed, therate of Medicare theFICAtaxremains portion on unchangedat1.45% incomelistedhereinfirst (12.4%forself-employed individuals).The FICA taxthatemployeespayremains unchangedat6.2%onthe 53% forself-employment of SocialSecurity portion income.The drops toprate the For2018, income. employment and to45% 2017 ($128,400 in 2018) is approximately 48% and 56% for self- $127,200ofThe 2017top rate for the first wages earned in withtaxableincomeover$500,000. taxpayers withtaxableincomeover$600,000andforsingle for marriedfilers income, such as short-term highest rate for ordinary capital gains For2018,the37% over $470,700and$418,400forsinglefilers. short-term with taxable income capitalgainsfor married taxpayers income,including 39.6%maximumrateforordinary For 2017, incomesubjecttotheAMT.28% forordinary regular taxandtheAMT—withseveralnotableexceptions tobe thresholds) for both the your (if taxable income exceeds certain Net long-term capitalgains are taxedatamaximum rateof 20% filingseparately). $125,000 formarriedtaxpayers earning more and than$200,000($250,000formarriedtaxpayers 

tax rate overview 15 EisnerAmper 2018 personal tax guide 16 taxpayers filingashead taxpayers of household. as headof filingseparatelyand household.SeeAppendixCfordetailed2018tax rate schedules,includingtaxratesformarriedtaxpayers Note: 2017 FEDERAL TAX RATE SCHEDULES 2017 AND 2018 FEDERAL TAX RATE SCHEDULES $ 0 $ 0 Taxable Income Married Filing JointlyorQualifying Widow(er) tax rates for married taxpayers filing separately and taxpayers filing filing filingseparatelyandtaxpayers See AppendixBfordetailed2017tax rateschedules,includingtaxratesformarriedtaxpayers 233,350 470,700 418,400 416,700 416,700 191,650 153,100 75,900 37,950 91,900 18,650 9,325 $ 0 $ 0 Base Tax Single 131,628.00 121,505.25 120,910.25 112,728.00 46,643.75 52,222.50 29,752.50 10,452.50 18,713.75 5,226.25 1,865.00 932.50 Next Dollar) Marginal Tax Marginal Tax Rate (Taxon 39.6% 39.6% 35% 33% 28% 25% 35% 33% 28% 25% 15% 10% 15% 10% 2018 FEDERAL TAX RATE SCHEDULES $ 0 $ 0 Taxable Income Married Filing JointlyorQualifying Widow(er) 400,000 500,000 200,000 600,000 315,000 165,000 157,500 82,500 38,700 77,400 19,050 9,525 $ 0 $ 0 Base Tax Single 150,689.50 161,379.00 8,907.00 45,689.50 32,089.50 14,089.50 64,179.00 91,379.00 28,179.00 4,453.50 1,905.00 952.50 Next Dollar) Marginal Tax Marginal Tax Rate (Taxon chart 1 24% 24% 35% 32% 22% 35% 32% 22% 37% 37% 12% 10% 12% 10% to a highertaxable income base and frequently results in a greater regular taxrateof itusuallyapplies (37% for2018), 39.6%for2017 highest the lowerthan is income onordinary rate AMT the While term totheAMT. capitalgainsandqualifieddividends alsoapplies of 28%.Asmentionedabove,the15%or20%rateonnetlong- income subject totheAMTistaxed at amaximum rate Ordinary •  **Includes 0.9%HospitalInsuranceTax income thresholds. foramountsabovecertain * Thetaxrateisactually2.9%,butonly 92.35%of self-employment incomeissubjecttotheMedicare Tax. ALTERNATIVE MINIMUM TAX investment incomethatmayalsoapplytodividendincome. There is an additional 3.8% Medicare Contribution Tax on net incometaxrates. corporations, are subjecttothe higherordinary dividends from a moneymarketfundornonqualifiedforeign forthepreferentialdo notqualify rateof (or20%),suchas 15% Dividendsthat and $418,400($425,800in2018)forsinglefilers). with taxable income over $470,700 ($479,000 in 2018) taxpayers rate thatappliestonetlong-term capitalgains(20%formarried and qualifiedforeign corporationsare taxedatthesame15% received dividends For 2017, from corporations domestic most term capitalgains. TaxContribution on net investment income, including net long- for more than12months. There isanadditional3.8%Medicare long-term capitalgainstreatment, youmusthaveheldtheasset some cases,theformer 15%ratemaystillapply. To benefitfrom discussed inthechapteroncapitalgainsanddividendincome.In SOCIAL SECURITY AND MEDICARE TAXES FOR 2017 AND 2018 Social Security2017 Medicare 2017 2018 2018 Maximum Income Subject toTax No limit No limit $128,400 $127,200 2.35%/No limit** 1.45%/No limit 2.35%/No limit** 1.45%/No limit 6.2%/$7,960.80 each 6.2%/$7,886.40 each Employer andEmployee Any excess of unearned income above $2,100 is then taxed at the free. istaxedatthechild’s for2017 Thenext$1,050 marginal rate. $1,050ofrate. For2017,thefirst thechild’s unearned incomeistax- parents’ highermarginal taxratetothechild’s generallylowertax incomefrom of the thatwouldshift income-producing property This is designedtolessen the effectivenessof intra-familytransfers student underage24,isgenerallytaxedattheparents’ taxrate. The unearned incomeof achildunderage19,orfull-time the AMTforamore detailed discussion. out threshold amounts have been increased. See the chapter on AMT.your phase exemption and exemption AMT the For2018, your AGI, since these deductions are not allowed in computing or youhavesignificantinvestmentexpensesinexcessof 2%of state withhighincometaxratesandreal estatetaxes,and/ tax. Thiswasespeciallytrueforthe2017taxyear, ifyouliveina income (see below). income (seebelow). also be subject to the Medicare Contribution Tax onnet investment the extent that rate applies to the parents’ income. The child may eligibleforthepreferentialincome is taxrateof or20%to 15% dividend income such as net long-term capital gains and qualifying wages, thatincomeistaxedatthechild’s marginal rate.Unearned the child’s). To theextentthatchildhasearned incomesuchas parents’ marginal rate(assumingtheparents’ rateishigherthan KIDDIE TAX Portion Tax Rates/Maximum TaxCost Tax Rates/Maximum

3.578%/No limit** 2.678%/No limit* 3.578%/No limit** 2.678%/No limit* 12.4%/$15,921.60 12.4%/$15,772.80 Self-Employed chart

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tax rate overview 17 EisnerAmper 2018 personal tax guide 18 $125,000 if married filing separate. The tax will apply to the lesser of lesser tothe apply will tax The separate. filing married if $125,000 widow(er)withdependentchild),$200,000ifsingle,and qualifying modifications) isinexcessof $250,000forajointreturn (and The additional3.8%taxwillapplyifyourAGI (withcertain beginningin2013. for years for a3.8%taxonnetinvestmentincomeof higherincometaxpayers The HealthCare andEducationReconciliationActof provided 2010 The threshold amountsare notindexedforinflation. married filing separate returns and $200,000 for all other taxpayers. of $250,000formarriedcouplesfilingjointreturns, $125,000for This taxappliestowagesand/orself-employment incomeinexcess An additional0.9%HospitalInsuranceTax appliestoearned income. the self-employment taxyoupay. primarily because you receive a deduction against AGI for 50% of and Medicare taxes). The reason there is not a greater spread is includingyouremployeesharefrom of wages(after SocialSecurity such income, compared to about 48% (43% for 2018)for income of for2018) ($128,400 $127,200 onthefirst 56% (53%for2018) effective taxrateonself-employment incomecanbeashigh employee’s of these taxes. As a result, portions for 2017, the federal and taxes almostdoublesbecauseyoupayboththeemployer’s If you are self-employed, your share of Social Security and Medicare subject totheMedicare ContributionTax. 2),butallearned incomeis Social Securitytaxislimited(seeChart Security and Medicare taxes. The amount of income subject to the Your wages and self-employment income are also subject to Social longer affectedbytheparent’s orsiblings’taxsituations. tax bracketsand rates. Therefore, the “kiddie tax” calculation is no of thechildisbeingtaxedatsingleindividual’sincome portion trusts andestates taxbrackets andrates, whereas the taxableearned of child’s The child. a atthe taxed unearnedis nettaxable income rates applicable to trusts andestates to the net unearned income andcapitalgains “kiddie tax”issimplifiedbyapplyingtheordinary through 2018 1, the 2025, December31, year beginningJanuary The Tax Cuts and Jobs Act has simplified the “kiddie tax.” From tax INVESTMENT INCOME MEDICARE CONTRIBUTION TAX ON NET MEDICARE WAGE SURTAX EMPLOYMENT TAXES are notindexedforinflation. Contribution Tax onnetinvestment income).Thethreshold amounts qualified dividendswillbe23.8%(20%plus3.8%additionalMedicare The maximumfederaltaxrateonlong-term capitalgainsand interest expenses. fees(over2%of AGI), andinvestment taxes, investment advisory income. Suchexpensesincludedirectly allocablestateandlocal income maybereduced byexpensesassociatedwithearning that instruments orcommodities.Theamountof gross investment from passive business activities andincome from trading infinancial interest, royalties, annuities, capitalgains, dividends, rents, income threshold amounts stated above. Net investment income includes your netinvestmentincomeorAGI inexcessof theapplicable result of theTax CutsandJobsAct. exemptioniseliminatedfromthe personal 2018through 2025asa at $384,000for However,2017. at $436,300 and forsingletaxpayers AGI over$261,500.Itcompletelyphasesoutformarriedtaxpayers withAGImarried taxpayers with over $313,800andsingletaxpayers of dependents. The 2017 PEP begins to phase out for your qualifying is$4,050foreach exemptionamount(“PEP”)for 2017 The personal Personal exemptions December 31,2025. through 2018 1, rules. Thisprovision issuspendedfrom January limit or80%of theitemizeddeductionssubjecttoreduction of the lesser 3% of AGI by which the amount exceeds a certain itemizeddeductionsare tobereduced by over $261,500.Certain with AGItaxpayers with AGI over $313,800and single taxpayers For 2017,the reduction of itemized deductions affects married Reduction of itemized deductions 1, 2018through December31,2025. deductions subjecttothe2%“haircut” are suspendedfrom January fees anddeductiblelegalexpenses.Miscellaneousitemized expenses, professional duesandsubscriptions,taxreturn preparation unreimbursed fees, business employee advisory investment include by 2%of yourAGI. Thedeductionssubjecttothe2%disallowance miscellaneous itemized deductions For 2017, you must reduce certain Reduction of itemized miscellaneous deductions PERSONAL EXEMPTIONS ITEMIZED DEDUCTIONS AND standard deductioninsteadof itemizeddeduction. standard deductionamounts,more maybeclaimingthe taxpayers As aresult of thechangesinitemized deductionsandtheincreased 1,2026. December31,2017andbefore January year after the itemizeddeductionsare notsubjecttophaseoutforanytax deductions thatare subjectto2% AGI floorlimitations.Inaddition, taxes paid. It also temporarily eliminates all miscellaneous itemized actual stateandlocalsalestaxpaidortheincome separately. havetheoptiontodeducteither Thetaxpayers of and$5,000formarriedfiling $10,000formarriedorsinglefilers taxes to amaximum the nonbusiness state/local taxes andproperty fromdeductions for tax years through 2018 2025,such as limiting The Tax Cuts and Jobs Act hasmade modifications to itemized FOR 2018 AND BEYOND

tax rate overview 19