What do you need to know about the new tax laws?
By: Guardian Tax Services
At this time of year, most people are still thinking about their 2017 income taxes. And rightfully so. (By the way, did you know GCU offers tax services?)
But it’s not too early to begin thinking about what the new tax laws mean for the 2018 tax year.
On December 22, 2017 the president signed into law H.R. 1 – Tax Cuts and Jobs Act. These new tax laws will not only lower tax rates (for most) but also eliminate numerous tax provisions. The individual provisions would expire by the end of 2025, but most of the corporate provisions would be permanent. Here are some important changes to keep in mind for the 2018 tax year.
Tax Rates for Individuals and Couples are Lowered
The number of tax brackets are still the same however the income threshold amounts have changed. Here’s how much income would apply to the new rates:
— 10% (income up to $9,525 for individuals; up to $19,050 for married couples filing jointly)
— 12% (over $9,525 to $38,700; over $19,050 to $77,400 for couples)
— 22% (over $38,700 to $82,500; over $77,400 to $165,000 for couples)
— 24% (over $82,500 to $157,500; over $165,000 to $315,000 for couples)
— 32% (over $157,500 to $200,000; over $315,000 to $400,000 for couples)
— 35% (over $200,000 to $500,000; over $400,000 to $600,000 for couples)
— 37% (over $500,000; over $600,000 for couples)
Standard Deduction was Increased
For single filers, the law increases it to $12,000 from $6,350 currently; for married couples filing jointly it increases to $24,000 from $12,700. The net effect: The percentage of filers who choose to itemize would drop sharply, since the only reason to do so is if your deductions exceed your standard deduction.
Personal Exemptions was Eliminated
In 2017 you could claim a $4,050 personal exemption for yourself, your spouse and each of your dependents. Under the new law this option has been eliminated.
State and Local Tax Deduction Gets a Cap
The new law will preserve the state and local tax deduction for anyone who itemizes, but it will cap the amount that may be deducted at $10,000.
Child Tax Credit Gets Expanded
The credit is doubled to $2,000 for children under 17 and the income threshold has been increased. Filers may claim the full credit to $200,000 for single; $400,000 for couples. Like the first $1,000 of the child tax credit, $400 of the additional $1,000 also will be refundable.
Temporary Credit for Non-Child Dependent was Created
The law allows parents to take a $500 credit for each non-child dependent whom they’re supporting, such as a child 17 or older, an ailing elderly parent or an adult child with a disability.
Cap on Mortgage Interest Deduction was Lowered
Filers who take out a new mortgage on a first or second home can deduct the interest on debt up to $750,000. Also, the law would no longer allow a deduction for the interest on home equity loans.
Mandate to Buy Health Insurance was Eliminated
There is no longer a penalty for not having health insurance.
Sources of Information:
TheTaxBook News Release 12/26/17
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