2018 tax brackets released, but subject to change
The House narrowly passed a GOP budget on Thursday. Speaker Paul Ryan expressed enthusiasm, while Minority Leader Nancy Pelosi said it was "drawing a line in the sand" between the middle class and extremely wealthy. (Oct. 26) AP.
Here's what you'll need to know -- with one big if.
The IRS gives taxpayers a couple of months of lead time every year in telling taxpayers what the tax brackets will be for the coming year.
Last year, there was a lot of uncertainty about whether the pre-released 2017 tax brackets would actually be the ones taxpayers would end up using, but tax reform has taken longer than some had expected.
Many Americans are more hopeful about the prospects for tax changes taking effect in 2018, but that hasn't stopped the IRS from releasing 2018 tax brackets. Below, you can see what will be in place if tax reform doesn't happen in the coming year.
Key information about your tax bracket
A lot of taxpayers find tax brackets bewildering. For instance, if you're in the 25% bracket, you won't pay a 25% tax rate on all of your income. For instance, single filers with taxable income of $40,000 are in the 25% bracket, but only the final $1,300 in income you earned actually gets taxed at that rate. The rest gets more favorable 10% or 15% tax rates.
In addition, tax brackets use taxable income as their starting point. This reflects reductions from personal exemptions and either the standard deduction, or itemized deductions. It can, therefore, be much lower than your gross income.
Finally but most importantly, these brackets are subject to change. If tax reform goes forward, these brackets could become history. However, if implementation of any future tax changes doesn't take effect until the 2019 tax year, you'll use these brackets.
To plan for your taxes, information about your tax bracket is useful. Knowing what you would have paid under the old tax laws will tell you how much you win or lose from any tax reform package that becomes law.
More:House approves Republican budget, now must reveal tax plan that delivers on promises
More:Chuck Schumer: Donald Trump's tax reform is nothing like Ronald Reagan's
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