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. 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 business 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 is 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.