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Tax benefit thresholds rise with inflation adjustments greater than last year

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The IRS has announced its annual cost-of-living and inflation adjustments for 2018, offering a bump that is proportionately greater than the modest rise from the year before. Tax laws require the IRS to adjust the dollar amounts of dozens of tax provisions each year to account for inflation. The tax brackets were adjusted with an approximate inflation rate of 1.94%.

The contribution limit to 401(k) plans increased to $18,500 while the limit for IRAs remained unchanged at $5,500. The annual gift tax exclusion finally increased to $15,000 after five years of remaining flat at $14,000. This year marked a noticeable increase across the board, including the exemptions on estate and generation-skipping transfer taxes, each of which increased by $110,000, to $5.6 million. The wage cap on Social Security taxes, which jumped significantly in 2017, rose modestly to $128,700, up $1,500.

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Contacts
Eddie Adkins
Partner Washington National Tax Office
T +1 202 521 1565

Jeff Martin
Partner Washington National Tax Office
T +1 202 521 1526

Dustin Stamper
Director Washington National Tax Office
T +1 202 861 4144

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