California Releases 2018 Rate Schedules and Other Adjusted Figures

The California Franchise Tax Board has released the 2018 California personal income tax indexed figures, based on a 3.9% inflation rate for the period from July 1, 2017, to June 30, 2018. Updated figures include the following:

– personal income tax rate schedules;

– return filing threshold table;

– itemized deduction reduction and personal exemption phaseout thresholds;

– miscellaneous credit amounts;

– alternative minimum tax exemption amounts;

– adjusted standard deduction;

– personal exemption amounts; and

– renter’s credit amounts.

Rates

For 2018, the indexed personal income tax rates for single taxpayers and married taxpayers filing separately range from 1.0% of the first $8,544 of taxable income (formerly, $8,223 for 2017) to 12.3% of taxable income that is $572,980 and over (formerly, $551,473 and over for 2017).

For married taxpayers filing jointly and surviving spouses with a dependent child, the rates range from 1.0% of the first $17,088 of taxable income (formerly, $16,446 for 2017) to 12.3% of taxable income that is $1,145,960 and over (formerly, $1,102,946 and over for 2017).

For taxpayers filing as heads of households, the rates range from 1.0% of the first $17,099 of taxable income (formerly, $16,457 for 2017) to 12.3% of taxable income that is $779,253 and over (formerly, $750,003 and over for 2017).

Return Filing Thresholds

For 2018, a single taxpayer or head of household taxpayer must file a return if the taxpayer’s adjusted gross income (AGI) exceeds an amount ranging from $14,154 to $36,569 (formerly, $13,623 to $35,208 for 2017) or if the taxpayer’s gross income exceeds an amount ranging from $17,693 to $40,108 (formerly, $17,029 to $38,614 for 2017).

A surviving spouse taxpayer with dependents must file a return if the taxpayer’s AGI exceeds an amount ranging from $26,387 to $36,569 (formerly, $25,390 to $35,208 for 2017) or if the taxpayer’s gross income exceeds an amount ranging from $29,926 to $40,108 (formerly, $28,796 to $38,614 for 2017).

The corresponding AGI and gross income thresholds requiring married couples to file a return range from $28,312 to $56,627 (formerly, $27,249 to $54,534 for 2017) and from $35,388 to $63,703 (formerly, $34,060 to $54,534 for 2017), respectively.

The number of dependents and the taxpayer’s age (under 65, or 65 or older) determine the filing threshold level that applies.

Itemized Deduction Reduction and Personal Exemption Phaseout Thresholds

The AGI thresholds that activate the reduction of itemized deductions and the phaseout of personal exemption credits for 2018 are:

– $194,504 for single taxpayers and married taxpayers filing separately (formerly, $182,703 for 2017);

– $389,013 for married taxpayers filing jointly and surviving spouses (formerly, $374,411 for 2017); and

– $291,760 for heads of households (formerly, $280,808 for 2017)

Miscellaneous Credits

For taxable years beginning on or after January 1, 2018, the earned income credit income ranges are expanded to full-time employment at the minimum wage and to working individuals who are ages 18 to 24 or over age 65. For 2018, the earned income credit is available to households with federal AGI equal to or less than:

– $16,750 if there are no qualifying children; or

– $24,950 if there are one or more qualifying children, which is the approximate full-time, state minimum wage as of January 1, 2019.

For taxable years beginning on or after January 1, 2019, the above amounts would be annually adjusted in the same manner as the income tax brackets.

The joint custody head of household credit and the dependent parent credit are increased for 2018 to the lesser of $469 (formerly, $451 for 2017) or 30% of net tax.

The qualified senior head of household credit is increased for 2018 to 2% of taxable income of up to $76,082 (formerly, $73,226 for 2017), up to a $1,434 (formerly, $1,380 for 2017) maximum credit amount.

Alternative Minimum Tax Exemption

The alternative minimum tax exemption amounts for 2018 are increased to:

– $71,531 (formerly, $68,846 for 2017) for single or unmarried taxpayers;

– $47,685 (formerly, $45,895 for 2017) for married taxpayers filing separately and estates and trusts; and

– $95,373 (formerly, $91,793 for 2017) for married taxpayers filing jointly and surviving spouses.

Exemption phaseouts begin at the following alternative minimum taxable income levels for 2018:

– $268,237 (formerly, $258,168 for 2017) for single or unmarried taxpayers;

– $178,822 (formerly, $172,110 for 2017) for married taxpayers filing separately and estates and trusts; and

– $357,650 (formerly, $344,225 for 2017) for married taxpayers filing jointly and surviving spouses.

Standard Deduction

The standard deduction increases to $4,401 (previously, $4,236) for single taxpayers and married taxpayers filing separate returns and to $8,802 (previously, $8,472) for married taxpayers filing jointly, surviving spouses, and heads of households.

Personal Exemptions

The personal exemption credits increase to $118 (previously, $114) for single taxpayers, married taxpayers filing separately, and heads of households and to $236 (previously, $228) for married taxpayers filing jointly and surviving spouses. The personal exemption amount for dependents increases to $367 (previously, $353).

Renter’s Credit

The renter’s credit will be available for single filers with adjusted gross incomes of $41,641 or less (previously, $40,078 or less) and for joint filers with adjusted gross incomes of $83,282 or less (previously, $80,156 or less).

Indexing – Tax Year 2018 Personal Income Tax Law, California Franchise Tax Board, September 14, 2018

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