As we say goodbye to 2017, we look towards a year of increased uncertainty when it comes for your finances. Usually, the only things that change are the small things, often tied to inflation.
But with tax reform, health care uncertainty, and other changes, this is shaping up to be a year where you should probably be on your toes. So here’s what you should be looking out for in 2018:
A few things were set to change in 2018 thanks to inflation adjustments. Tax-wise, the personal exemption was set to go up to $6,500 from $6,350 (to $13,000 from $12,700 for married couples). Other changes were set to be made to the alternative minimum tax, tax bracket boundaries, and tax credits like the earned income credit.
The list is long, but there’s a great rundown from the Internal Revenue Service that you should scan. Of course, much of it could significantly change due to the tax bill, which has not been finalized by the House and Senate or signed by President Donald Trump.
Your finances might have a few changes this coming year. (AP Photo/LM Otero, File)
You may have a tax cut
The GOP’s tax bill is not very good for lower- or middle-income people in the next decade, but it will likely yield a tax cut for all tax brackets in 2018. According to the Tax Policy Center, a family earning an annual income of between $48,600 and $86,100 would get an annual federal tax cut of $830.
However, it’s hard to predict your tax bill. The tax plan is being rushed and is filled with glitches and loopholes, though GOP leaders have said they will iron it out in the conference committee when the House and Senate meet.
You also might have a much higher tax bill
These tax cuts may, however, be neutered for residents of higher-tax states. Your taxes also might change considerably if you’re a grad student. People who itemize deductions may find themselves paying more as many deductions have been struck from the new bill.
The estate tax exemption stands to double if the tax bill is ironed out and signed by the president, which would allow $11 million to be exempted from taxation upon a death. While the previous $5.4 million exemption only touched about 5,200 families per year, this change will make it so that only the richest of the richest are taxed.
There is a lot about health care that could change next year. The GOP tax bill removes the tax penalty associated with the Obamacare mandate, which may destabilize the marketplace as it’s considered one of the core pillars that keep the ACA afloat. For the millions of people who get care through the public marketplace, there is a significant amount of uncertainty. However, 2018 plans should be locked in this open enrollment.
Nothing major is changing for Medicare, but the tax bill may trigger significant automatic cuts in 2018.
Social Security payments will increase 2.0% for 2018, due to a standard cost-of-living adjustment. On average, this comes out to an average monthly increase of $27 per person. The full retirement age also gets extended by two months to 66 years and four months in 2018. So if you were born in 1956, it’s something to pay attention to.
Retirement savings increases
IRA contributions are staying put at $5,500, but 401(k) contribution limits are increasing by $500 in 2018 to $18,500.