It’ s that time of year when we all scramble to get our taxes in order.
And this year the tax code has changed because President Trump ended 2017 by signing the Tax Cuts and Jobs Act law, bringing changes to how much individuals and companies will pay in taxes in 2018.
Here are some things to keep in mind:
1.Will you pay less
There’s been questions about who benefits the most from the new tax law, but what’s important to know is just about everyone will see at least some decrease in how much they pay. Chances are your personal tax bracket is likely lower. The new tax brackets are: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. (They were previously 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent), according to Wisebread.com
2.Corporations pay less
The new tax law simplifies and lowers taxes for companies. Corporations will pay a flat rate of 21 percent on profits, down from as much as 35 percent previously. This brings the US’s corporate tax rate below the global average. The new law also eliminates the alternative minimum tax (AMT) for corporations.
3.If you have kids
The new tax bill increased the child tax credit. This is a credit you receive if you have a dependent aged 17 or under. The credit was doubled, from $1,000 to $2,000 per child. The refundable portion of the credit was also increased to $1,400.
4.Deducting mortgage interest
Under the new tax law, the deduction for mortgage interest was capped at $750,000, but if you purchased a home before Dec. 15, 2017, it’s still $1 million. For most the mortgage interest will still be deductible. This only applies to a primary residence; interest on vacation homes is not deductible.
5.Deduction on of property and local taxes
Deductions will be capped at $10,000; this might equate to higher taxes for those living in places like California and New York.
6.Most deductions gone
Under past tax law, you could deduct moving expenses and many work-related expenses that were not reimbursed by your employer. You could deduct any costs you incurred when you did your taxes. These deductions and many others are gone, according to Wisebread.com
The new tax bill does allow for some itemized deductions. However, the standard deduction has doubled, to $12,000 for single filers, $18,000 for heads of household, and $24,000 for married couples filing jointly, according to Wisebread.com
8.No more personal exemptions
Under the previous tax law, the IRS allowed you to reduce tax liability by claiming a personal exemption. This exemption was $4,050 during the last 2 years. The new tax law eliminates personal exemptions and instead boosts the standard deduction.
9.Healthcare individual mandate
Under the Affordable Care Act, anyone who did not buy health insurance was subject to a penalty of 2.5 percent of their income or $695, whichever was higher. That penalty is gone in 2019 under the new tax law.
10.No changes apply to 2017
If you are affected by these new changes, know that when you file your tax return this year you won’t be working with the new tax law. Any money you earned in 2017 is taxed under the previous tax structure. This is important to remember when claiming deductions and trying to figure out proper tax rates for your income. No need to worry about the 2018 tax law until you file your tax return in 2019.