High Income TaxPayers

High-Income Taxpayers

Mid America Tax Planner

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High-Income Taxpayers

In addition to being subject to higher federal tax rates,taxpayers whose income exceeds certain levels have tax deductions and credits that are reduced or eliminated.The provisions listed may have additional qualifications and restrictions. Other provisions of the tax code, suchas fringe benefit limitations and taxation on the sale of a principal residence, may further restrict a taxpayer’s abilityto take deductions or cause the taxpayer to pay additionaltax. Ask your tax professional for more details.

Capital Gain Tax Rates Long-Term Capital Gain and Qualified Dividend Income Maximum Tax Rates

Single

Taxable income                          Max Rate

$0 to $38,600.................................0%

$38,601 to $425,800....................15%

$425,801 and over......................20%

HOH (Head of Household)

Taxable income                          Max Rate

$0 to $51,700.................................0%

$51,701 to $452,400....................15%

$452,401 and over...................... 20%

Estates and Trust

Taxable income                                                                               Max Rate

$0 to $2,600.......................................................................................... 0%

$2,601 to $12,700................................................................................15%

$12,701 and over.................................................................................20%

MFJ (Marriage Filling Jointly) or QW (Qualified Widow)

Taxable income                          Max Rate

$0 to $77,200.................................0%

$77,201 to $479,000.....................15%

$479,001 and over........................20%

MFS (Marriage Filing Separately)

Taxable income                          Max Rate

$0 to $38,600.................................0%

$38,601 to $239,500.................... 15%

$239,501 and over....................... 20%

Itemized Deductions and Personal

Exemptions

Itemized deduction phaseout. Effective for 2018, the overall limitation on itemized deductions is suspended. There is no limitation on deductions due to income.Taxes paid. Effective for 2018, the itemized deduction for state and local taxes is limited to $10,000 ($5,000 MFS).Foreign real property taxes are no longer deductible.Home mortgage interest. Effective for 2018, a taxpayer may treat no more than $750,000 as acquisition indebtedness ($375,000 MFS). The $1,000,000($500,000MFS) limitation continues to apply for any indebtedness incurred prior to December 15, 2017.

The deduction for home equity indebtedness (other than acquisition debt) is no longer allowed. Personal exemptions. Effective for 2018, the deduction for personal exemptions is suspended

Individual Retirement Arrangements (IRAs) 

IRA Individual Contribution Limits

                                                             2018                                 2017

Under age 50................................ $ 5,500............................ $ 5,500

Age 50 or older............................. $ 6,500............................ $ 6,500

Traditional IRA Phaseout Based on Modified AGI (MAGI)

If an individual is an active participant in an employersponsored pension plan, the deduction for a traditional IRA contribution is phased out when MAGI is between the following

Tax Year MFJ Single, HOH MFS

2018....... $ 101,000 to $ 121,000...... $ 63,000 to $ 73,000....... $ 0 to $ 10,000

2017....... $ 99,000 to $ 119,000...... $ 62,000 to $ 72,000....... $ 0 to $ 10,000

If the individual is not an active participant, but the spouse is, the non-active participant’s deduction is phased out when modified AGI is between the following

High-Income Taxpayers Tax Year MFJ MFS

2018....................$ 189,000 to $ 199,000............... $ 0 to $ 10,000

2017....................$ 186,000 to $ 196,000............... $ 0 to $ 10,000

Roth IRA Phaseouts

                                                               2018                                       2017

MFJ or QW........................ $ 189,000 to $ 199,000.......... $ 186,000 to $ 196,000

Single, HOH, or MFS*......... $ 120,000 to $ 135,000.......... $ 118,000 to $ 133,000

MFS............................................ $ 0 to $ 10,000................... $ 0 to $ 10,000

* MFS and did not live with spouse during the year.

Retirement Savings Contribution Credit (Saver’s Credit)

2018 Retirement Savings Contribution Credit Percentage

Rate MFJ HOH Single, QW, MFS

50% $ 0 – $ 38,000 $ 0 – $ 28,500 $ 0 – $ 19,000

20% $ 38,001 – $ 41,000 $ 28,501 – $ 30,750 $ 19,001 – $ 20,500

10% $ 41,001 – $ 63,000 $ 30,751 – $ 47,250 $ 20,501 – $ 31,500

0% Over $ 63,000 Over $ 47,250 Over $ 31,500

Child Tax Credit

AGI phaseout. The credit (up to $2,000 per qualifying child) is reduced by $50 for each $1,000 of modified AGI above:

• $400,000 Married Filing Jointly.

• $200,000 Single, Head of Household, Qualifying Widow(er), or Married Filing Separately.

Family Tax Credit

A nonrefundable credit of up to $500 is allowed for dependents other than a qualifying child for the Child Tax Credit.

Adoption Expenses

2018 maximum credit .................................................................. $ 13,810

2018 maximum exclusion............................................................. $ 13,810

AGI phaseout .......................................................... $ 207,140 – $ 247,140

Unused credit carryforward........................................................ 5 years

Medicare Provisions of the Affordable Care Act Increased Medicare Tax on Earned Income

The employee portion of the hospital insurance (Medicare) tax is increased by an additional tax of 0.9% on wages received in excess of the threshold amount. However,unlike the general 1.45% hospital insurance (Medicare) tax on wages, this additional tax is on the combined wages of the employee and the employee’s spouse, in the case of a joint return.

Medicare Tax on Unearned Income

Individuals. The tax is 3.8% of the lesser of net investment income or the excess of modified adjusted gross income over the threshold amount.

Threshold Amount

Joint return or surviving spouse................................................ $250,000

Married individual filing separately........................................... $125,000

All other tax filers......................................................................... $200,000

Education Benefits

2017 Education Benefits Comparison Chart

Benefit Annual Limit Modified AGI Phaseout American Opportunity /Hope Credit 40% of the credit may be refundable (limited to $1,000).

$2,500 credit per student.

$ 80,000 – $ 90,000

$ 160,000 – $ 180,000

(MFJ) Lifetime Learning Credit

Tax credit (nonrefundable).

$2,000 credit per tax return.

$ 57,000 – $ 67,000

$ 114,000 – $ 134,000

(MFJ) Coverdell 

Education Savings Account (ESA)

Tax-free earnings. $2,000 contribution per beneficiary.

$ 95,000 – $ 110,000

$ 190,000 – $ 220,000

(MFJ)U.S. Savings

Bond Interest Exclusion Tax-free interest. Amount of qualified education expenses.

$ 79,550 – $ 94,550

$ 119,300 – $ 149,300

(MFJ) Student Loan Interest Deduction 

Above-the-line tax deduction. $2,500 deduction.

$ 65,000 – $ 80,000

$ 135,000 – $ 165,000 (MFJ)

Contact Us

There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following:

• Pension or IRA distributions.

• Significant change in income or deductions.

• Job change.

• Marriage.

• Attainment of age 59½ or 70½.

• Sale or purchase of a business.

• Sale or purchase of a residence or other real estate.

• Retirement.

• Notice from IRS or other revenue department.

• Divorce or separation.

• Self-employment.

• Charitable contributions of property in excess of $5,000.