Every year the tax laws change, and every year certain parts of the old tax law get adjusted based on the rate of inflation. So you never really know for sure what your taxes are going to look like until near the end of the year, when it’s too late to do as much about it.
But the folks who put on their thinking caps and make good guesses have made their guesses again this year on two parts of the federal income tax that everyone has to take into account: the standard deduction and the personal exemption.
The prognosticators, who have been spot on in previous years, suggest that the standard deduction will rise from $4,750 to $4,850 for single folk, and from $9,500 to $9,700 for married folk filing together. The personal exemption is predicted to rise from $3,050 to $3,100.
Everyone who files (who isn’t claimed as a dependent on someone else’s tax return) gets to take these two deductions. Put simply, this means that the first $7,950 a single person makes is completely untaxable. (If you make upwards of $143,000, though, you’ll start to lose the personal exemption.)
After that $7,950, you have to start figuring out ways to shield your income from federal taxes. I discussed tax-deferred retirement accounts on as one option. But there are a number of others, and it indeed is possible to make several times that $7,950 base and still not pay any income tax on it.