While folks are still digesting the effects of the 2017 Tax Cuts and Jobs Act (TCJA), there are a few key updates you should know about for 2018. You should note that there will be many more updates announced over time as we learn more about the application of the TCJA. For now, keep the following few in mind.
401(k), 403(b), 457, and SARSEP elective deferrals have increased for 2018. You can now defer up to $18,500, if eligible. This is a $500 increase over 2017. However, the catch-up contribution for those age 50 and over remains the same at $6,000. So, if you are age 50 or over, your maximum contribution total is $24,500.
For Roth IRA or IRA participants, the contribution limits remain unchanged. You can still contribute $5,500 to your IRA or Roth IRA, and for those age 50 and over the catch-up contribution remains $1,000. Remember, even though it’s possible to contribute simultaneously to a Roth IRA and a traditional IRA, if eligible, you can only contribute a combined total of $5,500, or $6,500, if you are over age 50.
Do you have a dependent child under age 17? If so, you’re in luck! The Child Tax Credit (CTC) is doubled from $1,000 to $2,000. Better yet, if you are married the CTC doesn’t begin to phaseout until your income is $400,000 ($200,000 for single filers). The first $1,400 of the CTC is refundable.
529 Plans also get an upgrade. Previously, 529 accounts could only be used to pay for post-secondary qualified education expenses to avoid the 10% penalty. Now, 529 accounts can be used for K-thru-12 education and homeschooling expenses, up to $10,000.
The Social Security wage base has been increased. The current wage base for 2018 is now $128,400. That’s a $1,200 increase over 2017. It should also be noted that the Social Security cost-of-living adjustment for 2018 is 2%.
If you are not sure how these changes will impact your finances, talk to a qualified tax advisor. If you would like to work on incorporating these changes into your financial life, contact me. As an independent Certified Financial Planner™, I can help you plan for 2018. Contact me and let’s get started. #talktometuesday #education #Hireaplanner #tax #taxfiling #stressfree #newyear #savings #taxchanges #2017TCJA #taxcuts #taxcutsjobsact #529plan #IRA #RothIRA #socialsecurity