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Your 2018 Tax Return: What You Need to Know

January 14, 2019

2 min read

It’s income tax filing season again, and that means either you owe Uncle Sam money, or he owes you a refund.

That’s why it’s important to keep informed about changes to tax laws that could affect how you file. In late 2017, Congress passed the most sweeping tax cuts in a generation, and these changes are in effect for the 2018 tax year.

What changed?

The so-called Tax Cuts and Jobs Act revised nearly all parts of the tax code, according to financial experts, but it provided the most significant tax cuts for businesses and the wealthy.

Meanwhile, middle class and poorer taxpayers received more modest tax savings of about $1,600 on average in 2018, according to the Tax Policy Center.

Here’s a breakdown of the tax brackets:

2018 Federal Income Tax Rates, Unmarried Individuals

IncomeRate
up to $9,700 10%
Over $9,700 to $39,47512%
Over $39,475 to $84,20022%
Over $84,200 to $160,725 24%
Over $160, 725 to $204,10032%
Over $204,100 to $510,300 35%
Over $510,30037%

Source: IRS, 2019

2018 Federal Income Tax Rates, Married Filing Jointly

Income Rate
Up to $19,400 10%
Over $19,400 to $78,95012%
Over $78,950 to $168,40022%
Over $168,400 to $321,45024%
Over $321,450 to $408,20032%
Over $408,200 to $612,35035%
Over $612,35037%

Source IRS, 2019

What does it mean to be in a tax bracket?

The federal income tax system is progressive, which means you pay increasingly more taxes on your income as you earn more money. The current tax bracket rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

But you don’t necessarily pay the full tax rate on all of your income. For example, let’s say you’re single and you make $45,000 annually. You’d pay 10% on the amount up to $9,700. You’d pay 12% on the amount from $9,701 up to $39,475; and then 22% on the amount from $39,476 to $45,000.

Impact of the federal government shutdown

Good to know: Taxpayers filing during the government shutdown could find their refunds delayed, according to reports.

However, you should still get your refund.

How taxes can affect how you fund your retirement account

For the 2018 tax year, you can fund either a 401(k), IRA, or Roth IRA until the tax filing deadline, which is April 15, 2019.

Traditional IRAs and 401(k) are tax-preferred accounts that can reduce taxes on your adjusted gross income, and potentially lower what you pay in taxes.

People under the age of 50 can put up to $5,500 into an IRA, and $18,500 into a 401(k). People who are 50 and older can put $6,500 into an IRA, and up to $24,500 into a 401(k). (For the 2019 tax year, these limits change. Find out more here.)

Get smarter every day

We all have to pay taxes. Check out Stash Learn every day and learn more about how you can stay on top of changes to the rules so you stay ahead of the game.

By Jeremy Quittner
Jeremy Quittner is the senior writer for Stash.

Disclosure: This information should not be construed as Tax or Legal advice. Please consult a Tax professional for your questions.
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