Last year Congress enacted some changes to the tax laws which will affect your 2018 tax return, which is due April 15, 2019. There are lots of changes and only a knowledgeable tax preparer will fully understand them but here are some of the key changes to note:
In the past, the full amount of state and local property, income, and sales tax you paid was deductible. For many people this was a sizeable deduction. Starting with the 2018 tax return, there is a $10,000 on this deduction. While it is easy think that this only affects the rich, in states where there is a high income or real property tax rate, taxpayers will feel this deduction reduction and could end up paying more income taxes. This could also apply to someone who owns a home and bought a new car last year. Depending on the amounts they paid, their deduction for these expenses could be capped.
Although this deduction has been capped, there is an upside, the standard deductions have been raised from $6,350 for single filers and $12,700 for married filing jointly taxpayers to $12,000 and $24,000 respectively. With about 30% of taxpayers generally itemizing deductions on their tax returns, this percentage should drop significantly and minimize the affect of the deduction caps. It also means that the IRS will most likely take a harder look at those who do itemize as they may feel that those who did itemize have a greater likelihood of not being completely honest on their returns.
There are also two other bigger changes for the 2018 tax year that will help taxpayers pay less taxes.
First, in four income brackets, the tax rates have been reduced.
For Single Filers
Current Tax Rate Current Income Brackets New Tax Rate
15% $9,326 -$37,950 12%
25% $37,951 – $91,900 22%
28% $91,901 – 191,650 24%
33% $191,650 – $418,400 32%
For Married Joint Filers
Current Tax Rate Current Income Brackets New Tax Rate
15% $18,651 – $75,900 12%
25% $75,901 – $153,100 22%
28% $153,101 – 233,350 24%
33% $233,351 – $416,700 32%
Additionally, those in the highest income levels, more than $418,400 for single filers and more than $470,700 for married joint filers, will see a reduction in their tax rate for 39.6% to 37%.
The Alternative Minimum Tax (AMT) will also affect less taxpayers as the income exempted from the AMT was increased so fewer taxpayers will pay it. The income exemption jumped from $54,300 to $70,300 for single taxpayers and from $84,500 to $109,400 for married filing joint taxpayers.
These are only some of the changes in the tax code for 2018. It can be difficult ensuring that you are filing the best return you can, minimizing your tax liability, and hopefully getting a refund in the process. Going to a trained tax professional to prepare your taxes is always the best course of action.
