Coming from the biggest federal tax law change in over 30 years is the Tax Cuts and Jobs Act.
There are MANY individual tax provisions that have been completely deleted from the system, to name a few:
-No more itemized deduction for miscellaneous deductions like investment expenses, unreimbursed employee expenses, and tax prep fees…
-The personal exemption deduction you get from each dependent and yourself is not eliminated
-Casualty losses and theft losses are gone as well (unless the loss was incurred from a federally declared disaster)
-There are no more deductions for charitable contributions made to educational institutions in exchange for the right to purchase tickets to an event.
There are also some provisions that were increased as well:
-The standard deduction for a single taxpayer increased to $12,000.
-The standard deduction for married couples increased to $24,000
This means if you do not “itemize” your deductions, you have an option to get a $12,000 or $24,000 “freebee” to help reduce your taxable income.
Given the fact that the exemption is now eliminated, Congress and the IRS discussed the increase of the Child Tax Credit to $2,000 per qualifying child.
There also is a brand new “Family Tax Credit” that can amount to $500 for the dependents who are not a qualifying child. In the past you would be able to get a $4000 deduction that reduces your income for this taxpayer, now they allow you to potentially have a $500 “credit” which can reduce your tax liability dollar for dollar instead of just reducing your taxable income.
The maximum tax bracket for individuals is now reduced to 37%.
The home mortgage interest deduction is reduced to $750,000 of the mortgage. For example, if your loan is up to $1,000,000 on your primary home, you would be able to deduct the interest expense up to the amount of $750,000 so 75% of your interest would deductible. The old rules apply if it is grandfathered in.
State and Local Taxes is now limited to $10,000. This is also known as SALT deduction. This can be concerning for individuals with large property tax bills or large state tax deductions.
There are many more provisions that have changed for 2018 and beyond, if you need more guidance and tax planning to tackle this new provision you may contact our office at 626-355-1242 or visit our website www.AccurateSierraMadre.com and follow our twitter @AthletesTaxMan for many tax strategies and tips to help reduce your tax burden.