Thank you for contacting Don Fitch Accountancy to complete your 2018 Individual Federal and/or State Tax Returns (Past Due and/or Delinquent).
Please find attached your 2018 Income Tax Organizer for use in gathering pertinent income and expense data. I strongly recommend that you use this tax organizer for listing your information so that we may provide you with the best possible preparation service.
Your federal and state income tax returns will be prepared and computer processed from the information you will furnish. We will not audit or otherwise verify the data you submit, although clarification may be requested. We will resolve questions involving tax rules in your favor. We appreciate the confidence you have placed in us. You may be assured that all services requested will receive our personal attention. Please print the attached, complete, and return as soon as possible.
Tax Year 2018 Federal Tax Law Highlights and Key Changes
A Helpful Guide for Individuals Catching Up on Unfiled Tax Returns
Summary of Major Changes for Tax Year 2018
- Increased standard deduction amounts
- Elimination of personal exemptions
- Expanded Child Tax Credit
- New credit for other dependents
- Significant changes to itemized deductions
- Reduced income tax rates across most brackets
- Increased Alternative Minimum Tax exemption amounts
- Higher estate and gift tax exclusion
- New limits on business loss deductions
Tax year 2018 marked one of the most sweeping shifts in federal tax law in decades. Many of these changes stemmed from the Tax Cuts and Jobs Act, which reshaped deductions, credits, and tax brackets for millions of taxpayers. If you are working through unfiled tax returns or reviewing unfiled returns from prior years, understanding the rules that applied specifically to 2018 is essential. This guide walks you through the most important updates so you can file accurately and confidently.
Standard Deduction Increases
One of the most notable changes for 2018 was the substantial increase in the standard deduction. This adjustment simplified filing for many taxpayers and reduced the number of individuals who itemized deductions.
- Single filers: 12,000
- Married filing jointly: 24,000
- Head of household: 18,000
These increases replaced the prior combination of standard deductions and personal exemptions, which were eliminated beginning in 2018.
Elimination of Personal Exemptions
Before 2018, taxpayers could claim a personal exemption for themselves, their spouse, and each dependent. For tax year 2018, the personal exemption amount was reduced to zero. This change was offset in part by the higher standard deduction and expanded child‑related credits.
Expanded Child Tax Credit
The Child Tax Credit doubled for 2018, increasing to 2,000 per qualifying child under age 17. Additional improvements included:
- A refundable portion of up to 1,400
- Higher income phaseout thresholds, allowing more families to qualify
This expansion was especially helpful for families who previously lost tax benefits due to the elimination of personal exemptions.
New Credit for Other Dependents
Taxpayers supporting dependents who did not meet the Child Tax Credit age requirement gained access to a new 500 nonrefundable credit. This applied to older children, elderly parents, or other qualifying relatives.
Adjustments to Itemized Deductions
Tax year 2018 brought major changes to itemized deductions, affecting millions of taxpayers. These updates are particularly important for anyone preparing unfiled tax returns from that year.
State and Local Tax Deduction
The deduction for state and local taxes, including property tax, was capped at 10,000. This limit applied to both single filers and married couples filing jointly.
Mortgage Interest Deduction
For mortgages originating after December 15, 2017, interest was deductible only on loan balances up to 750,000. Older mortgages retained the previous 1 million limit.
Home Equity Loan Interest
Interest on home equity loans was no longer deductible unless the funds were used to buy, build, or substantially improve the home securing the loan.
Miscellaneous Itemized Deductions
Many miscellaneous deductions subject to the two percent adjusted gross income threshold were eliminated. This included unreimbursed employee expenses, tax preparation fees, and investment advisory fees.
Medical Expense Deduction
Medical expenses exceeding 7.5 percent of adjusted gross income were deductible for 2018, offering temporary relief before the threshold increased in later years.
Lower Income Tax Rates
Most taxpayers saw reduced tax rates in 2018. While the number of brackets remained seven, the rates shifted to:
- 10 percent
- 12 percent
- 22 percent
- 24 percent
- 32 percent
- 35 percent
- 37 percent
These lower rates applied across a broader range of income levels, resulting in reduced tax liability for many households.
Alternative Minimum Tax Relief
The Alternative Minimum Tax exemption amounts increased significantly for 2018, and the income thresholds for phaseouts rose as well. This change reduced the number of taxpayers subject to the AMT.
Estate and Gift Tax Exclusion
The federal estate and gift tax exclusion doubled for 2018, rising to 11.18 million per individual. This adjustment provided substantial planning opportunities for high net worth taxpayers.
Business Loss Limitations
Tax year 2018 introduced new limits on the deduction of business losses for noncorporate taxpayers. Excess business losses were no longer fully deductible in the year incurred and were instead carried forward as part of the net operating loss rules.
Qualified Business Income Deduction
A major new benefit for many self‑employed individuals and owners of pass‑through entities was the Qualified Business Income deduction. This allowed eligible taxpayers to deduct up to 20 percent of qualified business income, subject to income thresholds and business type limitations.
Why These Changes Matter for Unfiled Tax Returns
If you are catching up on unfiled returns, understanding the rules that applied specifically to 2018 is crucial. Each tax year stands alone, and the IRS requires that late returns follow the laws in effect for that year. Filing accurately helps you:
- Reduce penalties
- Claim refunds before they expire
- Prevent enforced IRS actions
- Restore compliance for future filings
Tax year 2018 is especially important because the changes were so extensive. Many taxpayers who delayed filing may be unsure how the new rules affected their deductions, credits, or overall tax liability. A clear understanding of these updates can make the process smoother and help you avoid costly mistakes.
Conclusion: Key Takeaways for Tax Year 2018
- Standard deductions increased significantly
- Personal exemptions were eliminated
- Child Tax Credit expanded and new dependent credit introduced
- Major changes to itemized deductions
- Lower income tax rates across most brackets
- AMT relief for many taxpayers
- Higher estate and gift tax exclusion
- New limits on business losses
If you are working through unfiled tax returns for 2018, these highlights will help you navigate the year’s unique rules with confidence. If you would like, I can also prepare a version optimized for your website layout or assist with additional tax year summaries.
DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260
Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968
Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com
