Updated January 16, 2019
The new tax law brings some important tax changes. Here are some brief highlights:
1. Along with changes in the tax rates and brackets, the standard deduction nearly doubles.
- Single taxpayers get a $12,000 standard deduction
- Married filing joint will get a $24,000 standard deduction.
These increases mean that fewer taxpayers will have to itemize.
TIP: If you have large deductions such as medical, charitable contributions, real estate taxes then you may go over the standard deduction and can itemize.
2. The increased child tax credit goes from $1,000 to $2,000 per child. Families with children under 17 will benefit. There’s also a $500 nonrefundable credit for qualifying dependents other than qualifying children (For example a taxpayer’s 17-year-old child or elderly parent.)
3. If you have income from a (self-employed business, LLC or S Corporations) there’s a new 20% deduction from income. There are limitations and thresholds but this will help small businesses save taxes.
4. A few deductions are gone in 2018 through 2025:
- Moving expenses no longer allowed except those in the military.
- Alimony payments for agreements executed after 12/31/2018 will not be deductible and will be excluded from the recipient’s taxable income.
- The State and Local tax deduction are capped at $10,000.
- Medical expense deductions are deductible only to the extent they exceed 7.5% of adjusted gross income.
- Miscellaneous itemized deductions subject to the 2% threshold such as financial investment fees and employee business expenses are not allowed in 2018 through 2025.
- Charitable deductions for payments made in exchange for college athletic event seating rights are eliminated.
- 529 savings plan distributions can now be used to pay primary and post-secondary school expenses.
The new tax laws detailed above are the most common for individual taxpayers. As always, please contact me with any questions.