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taxmap/pubs/p505-000.htm#en_us_publink1000194307
Publication 505

Tax  
Withholding  
and Estimated  
Tax

For Use in Calendar Year 2017
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taxmap/pubs/p505-000.htm#en_us_publink1000194308Introduction

The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. There are two ways to pay as you go. This publication explains both of these methods. It also explains how to take credit on your return for the tax that was withheld and for your estimated tax payments.
If you didn’t pay enough tax during the year, either through withholding or by making estimated tax payments, you may have to pay a penalty. Generally, the IRS can figure this penalty for you. This underpayment penalty, and the exceptions to it, are discussed in chapter 4.
taxmap/pubs/p505-000.htm#en_us_publink1000194309
Nonresident aliens.(p2)
Before completing Form W-4, Employee's Withholding Allowance Certificate, nonresident alien employees should see the Instructions for Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual. Also see chapter 8 of Pub. 519, U.S. Tax Guide for Aliens, for important information on withholding.
taxmap/pubs/p505-000.htm#en_us_publink100046845

Comments and suggestions.(p2)

For Use in Calendar Year 2017
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We welcome your comments about this publication and your suggestions for future editions.
You can send us comments from IRS.gov/FormComments.
Or you can write to:

Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224


Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.
taxmap/pubs/p505-000.htm#en_us_publink100046846
Ordering forms and publications.(p2)
Visit IRS.gov/FormsPubs to download forms and publications. Otherwise, you can go to IRS.gov/OrderForms to order current and prior-year forms and instructions. Your order should arrive within 10 business days.
taxmap/pubs/p505-000.htm#en_us_publink100046847
Tax questions.(p2)
If you have a tax question not answered by this publication, check IRS.gov and How To Get Tax Help at the end of this publication.

What's New for 2018(p2)

For Use in Calendar Year 2017
rule
Use your 2017 tax return as a guide in figuring your 2018 estimated tax, but be sure to consider the following.
taxmap/pubs/p505-000.htm#en_us_publink100079320
Change in tax rates.(p2)
For 2018, most tax rates have been reduced. The 2018 tax rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%.
taxmap/pubs/p505-000.htm#en_us_publink100079321
Moving expenses no longer deductible.(p2)
For 2018, you can no longer deduct your moving expenses unless you are a member of the Armed Forces on active duty.
taxmap/pubs/p505-000.htm#en_us_publink100079047
Deduction for personal exemptions suspended.(p2)
For 2018, you can’t claim a personal exemption deduction for yourself, your spouse, or your dependents.
taxmap/pubs/p505-000.htm#en_us_publink100079322
Child tax credit and additional child tax credit. (p2)
For 2018, the maximum credit is increased to $2,000 per qualifying child. The maximum additional child tax credit is increased to $1,400. In addition, the income threshold at which the credit begins to phase out is increased to $200,000 ($400,000 if married filing jointly).
taxmap/pubs/p505-000.htm#en_us_publink100079323
Credit for other dependents. (p2)
A new credit of up to $500 is available for each of your dependents who does not qualify for the child tax credit. In addition, the maximum income threshold at which the credit begins to phase out is increased to $200,000 ($400,000 if married filing jointly).
taxmap/pubs/p505-000.htm#en_us_publink100079324
Social security number (SSN) required for child tax credit. (p2)
Your child must have an SSN issued before the due date of your 2018 return (including extensions) to be claimed as a qualifying child for the child tax credit or additional child tax credit. If your dependent child has an ITIN, but not an SSN, issued before the due date of your 2018 return (including extensions), you may be able to claim the new credit for other dependents for that child.
taxmap/pubs/p505-000.htm#en_us_publink100079325
Unearned income of children. (p2)
For 2018, the tax rates and brackets for the unearned income of children have changed. The new tax rates applicable to unearned income in excess of $2,550 are 24%, 35%, and 37%.
taxmap/pubs/p505-000.htm#en_us_publink100079048
Changes to itemized deductions. (p2)
For 2018, the following changes have been made to itemized deductions that can be claimed on Schedule A.
  • Your itemized deductions are no longer limited if your adjusted gross income is over a certain amount.
  • You can deduct the part of your medical and dental expenses that is more than 7.5% of your adjusted gross income.
  • Your deduction of state and local income, sales, and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if married filing separately).
  • You can no longer deduct job-related expenses or other miscellaneous itemized deductions that were subject to the 2% of AGI floor. You may still deduct certain other items on Schedule A, such as gambling losses.
  • For indebtedness incurred after December 15, 2017, the deduction for home mortgage interest is limited to interest on up to $750,000 of home acquisition indebtedness. This new limit doesn’t apply if you had a binding contract to close on a home after December 15, 2017, and closed on or before April 1, 2018, and the prior limit would apply.
  • You can no longer deduct interest on home equity indebtedness, which means indebtedness not incurred for the purpose of buying, building, or substantially improving the qualified residence secured by the indebtedness.
  • The limit on charitable contributions of cash has increased from 50% to 60% of your adjusted gross income.
For more information, see the Instructions for Schedule A.
taxmap/pubs/p505-000.htm#en_us_publink100079326
Deduction for qualified business income. (p2)
For tax years beginning after December 31, 2017, taxpayers other than corporations are entitled to a deduction of up to 20% of their qualified business income from a qualified trade or business. The deduction is subject to multiple limitations based on the type of trade or business, the taxpayer’s taxable income, the amount of Form W-2 wages paid with respect to the qualified trade or business, and the unadjusted basis of qualified property held by the trade or business. The deduction can be taken in addition to the standard or itemized deductions. For more information, see Code section 199A.
taxmap/pubs/p505-000.htm#en_us_publink100079049
Alternative minimum tax (AMT) exemption amount increased.(p2)
The AMT exemption amount is increased to $70,300 ($109,400 if married filing jointly or qualifying widow(er); $54,700 if married filing separately). The income level at which the AMT exemption begins to phase out has increased to $500,000 ($1,000,000 if married filing jointly).
taxmap/pubs/p505-000.htm#en_us_publink100078168
Standard deduction amount increased.(p2)
For 2018, the standard deduction amount has been increased for all filers, and the amounts are as follows.
  • Single or Married Filing Separately—$12,000.
  • Married Filing Jointly or Qualifying Widow(er)—$24,000.
  • Head of Household—$18,000.
Due to the increase in the standard deduction and reduced usage of itemized deductions, you may want to consider filing a new Form W-4.
taxmap/pubs/p505-000.htm#en_us_publink1000194325
Lifetime learning credit income limits.(p2)
In order to claim a lifetime learning credit, your modified adjusted gross income (MAGI) must be less than $57,000 ($114,000 if married filing jointly).
taxmap/pubs/p505-000.htm#en_us_publink1000194326
Retirement savings contribution credit income limits increased.(p2)
In order to claim this credit for 2018, your MAGI must be less than $31,500 ($63,000 if married filing jointly; $47,250 if head of household).
taxmap/pubs/p505-000.htm#en_us_publink1000194328
Adoption credit or exclusion.(p2)
The maximum adoption credit or exclusion for employer-provided adoption benefits has increased to $13,810. In order to claim either the credit or exclusion, your MAGI must be less than $247,140.
taxmap/pubs/p505-000.htm#en_us_publink1000194330
Earned income credit (EIC).(p2)
You may be able to take the EIC in 2018 if:
  • Three or more children lived with you and you earned less than $49,194 ($54,884 if married filing jointly),
  • Two children lived with you and you earned less than $45,802 ($51,492 if married filing jointly),
  • One child lived with you and you earned less than $40,320 ($46,010 if married filing jointly), or
  • A child didn’t live with you and you earned less than $15,270 ($20,950 if married filing jointly).
Also, the maximum MAGI you can have and still get the credit has increased. You may be able to take the credit if your MAGI is less than the amount in the above list that applies to you. The maximum investment income you can have and get the credit is $3,500 for 2018.

Reminders(p3)

For Use in Calendar Year 2017
rule
taxmap/pubs/p505-000.htm#en_us_publink1000194332
Future developments.(p3)
The IRS has created a page on IRS.gov for information about Pub. 505 at IRS.gov/Pub505. Information about any future developments affecting Pub. 505 (such as legislation enacted after we release it) will be posted on that page.
taxmap/pubs/p505-000.htm#en_us_publink1000194333
Social security tax.(p3)
Generally, each employer for whom you work during the tax year must withhold social security tax up to the annual limit. The annual limit is $128,400 in 2018.
taxmap/pubs/p505-000.htm#en_us_publink100078169
Individual taxpayer identification number (ITIN) renewal.(p3)
If you were assigned an ITIN before January 1, 2013, or if you have an ITIN that you haven’t included on a tax return in the last 3 consecutive years, you may need to renew it. For more information, see the Instructions for Form W-7.
taxmap/pubs/p505-000.htm#en_us_publink10005368
Health care coverage.(p3)
When you file your 2018 tax return in 2019, you will need to either (1) indicate on your return that you and your family had health care coverage throughout 2018, (2) claim an exemption from the health care coverage requirement for some or all of 2018, or (3) make a payment if you don’t have coverage or an exemption(s) for all 12 months of 2018. See Form 8965 and its instructions for more information on claiming an exemption or making a payment.
taxmap/pubs/p505-000.htm#en_us_publink100028894
Advance payments of the premium tax credit.(p3)
If you buy health insurance through the Health Insurance Marketplace, you may be eligible to have advance payments of the premium tax credit paid on your behalf to the insurance company. Receiving too little or too much in advance will affect your refund or balance due. Promptly report changes in your income or family size to your Marketplace. See Form 8962 and its instructions for more information.
taxmap/pubs/p505-000.htm#en_us_publink10005662
Additional Medicare Tax.(p3)
Generally, a 0.9% Additional Medicare Tax applies to Medicare wages, Railroad Retirement Tax Act compensation, and self-employment income, over $200,000 if you are filing as single, head of household, or qualifying widow(er), over $250,000, if you are married filing jointly, and over $125,000 if you are married filing separately. You may need to include this amount when figuring your estimated tax. You may also request that your employer deduct and withhold an additional amount of income tax withholding from your wages on Form W-4.
taxmap/pubs/p505-000.htm#en_us_publink10005663
Net Investment Income Tax (NIIT).(p3)
You may be subject to NIIT. NIIT is a 3.8% tax on the lesser of net investment income or the excess of your MAGI over $200,000 ($250,000 if married filing jointly or qualifying widow(er); $125,000 if married filing separately). NIIT may need to be included when figuring estimated tax. You may also request that your employer deduct and withhold an additional amount of income tax withholding from your wages on Form W-4.
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Photographs of missing children.(p3)
The IRS is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.