TAX REFORM - How does it affect you?

Published on 30 November -1 in News
Karen Wiseman (author)

Karen Wiseman


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Karen Wiseman

Karen Wiseman

TICA (Tax Cuts and Jobs Act) was signed in December 2017.  Virtually all taxpayers (individuals and businesses) are impacted by changes in the tax reform legislation. Most changes take effect on January 1, 2018. Tax returns filed during the spring of 2018 (for the 2017 tax year) are generally not affected. But knowing about these changes now will help you plan and understand how the TCJA could impact your take-home pay and tax refund.  Below is a general overview of some of the new tax changes beginning in 2018.

Tax brackets and tax rates change for most taxpayers

Most tax filers will pay tax using a new tax bracket and tax rate structure. In comparison to previous tax brackets and tax rates, the new rates due to the Tax Cuts and Jobs Act are slightly lower and the brackets are generally slightly broader. 

Personal and dependent exemptions are eliminated
Under the TCJA, personal and dependent exemptions are eliminated from 2018 through 2025. 


Child tax credit increased through 2025
Through 2025, the TCJA increases the maximum child tax credit for qualifying children under age 17 from $1,000 to $2,000. The refundable portion of the credit increases from $1,000 to $1,400.  These amounts will be subject to phaseouts based in income.

New credit for non-child dependents available through 2025
The TCJA allows a new $500 nonrefundable credit for dependents who do not qualify for the child tax credit. Taxpayers can claim this credit for children who are too old for the child tax credit, as well as for non-child dependents.  Taxpayers cannot claim the credit for themselves or their spouse (if MFJ).

Standard deduction increases through 2025
The standard deduction will increase. In 2018, the standard deduction amounts will be:

$12,000 (single)
$18,000 (head of household)
$24,000 (married filing jointly)


Health care penalty eliminated
The penalty for failure to obtain health insurance coverage (the “individual mandate”) will be eliminated beginning in 2019. Taxpayers who did not have coverage in 2017 or 2018 will continue to owe a penalty for those years, unless they qualify for an exemption.

Self-employed taxpayers may claim a new deduction for qualified business income
Self-employed taxpayers can deduct up to 20% of qualified business income from a sole proprietorship, partnership, or S corporation.

 

Want to learn more?  Give us a call, We Speak Tax.

Wiseman Tax & Bookkeeping, Trinity

727-372-7744

 

This material has been prepared for informational purposes only and it is not intended to provide, and should not be relied on for tax, legal or accounting advice.  You should consult your own tax, legal and accounting advisors before engaging in any transaction.

 



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