Tax laws are changing, and many taxpayers might be wondering what that means and how it will affect them. For the tax year 2017, it will be the last time you file under the old set of guidelines. Who knows what the future holds (while this is the largest tax overhaul since the 1980s, each new administration likes to put their own spin on tax law, so it inevitably changes under each new president), but for at least the next few years, the new tax reform holds sway.
The new tax bill has been pretty polarizing for most Americans, and there are a lot of new pieces to be aware of. Here are some things you may have missed in all the hoopla:
Teachers can still deduct school supply expenses.
A contentious proposal that ended up getting scrapped, deductions for teachers who spend their own income on school supplies was going to be removed. However, due to large public outcry, lawmakers decided to keep allowing teachers to utilize this deduction.
The standard deduction has increased for everyone.
Whether married, single, married but filing individually, or head of household, the standard deduction has effectively doubled for most people in an effort to cut down on itemized filings.
Medical deductions are more beneficial.
2018 is a good year to finally get an expensive medical procedure done, if you’ve been putting it off. Taxpayers used to have to spend 10 percent of their adjusted gross income on qualifying medical expenses to take a deduction, but now this has been lowered to 7.5 percent. That means your medical bills will be far less burdensome since you can deduct more of the costs when it comes time to file your taxes.
Your tax bracket may have changed.
Under the new tax bill, most income tax brackets have changed. Check them out here to find out if your income bracket has been affected. If so, you may have to update your withholdings.
The marriage penalty has changed.
Couples who file jointly may now be able to file under their combined total income, pushing them into a higher tax bracket and lowering their total taxes owed.
If you’re wealthy, taxes won’t be as much of a burden.
For those in the top tax brackets, taxes have been lowered drastically. A holdover from the Reagan administration, the belief here is that top earners are also job creators, and when these folks pay fewer taxes, they’ll hopefully create more jobs.
If you’re poor, none of this will really affect you.
While most everyone’s tax bracket has changed, those in the lowest income bracket haven’t really been affected at all, though they may see cuts to any government programs they currently utilize.
Alimony has changed.
Before this tax bill, alimony payments were tax deductible, and alimony received had to be treated as income. Both of these provisions have been eliminated. This essentially shifts the alimony tax burden from the payee to the payor.
No one will be penalized for not having insurance.
Under the Affordable Care Act, any individual who was not consistently medically-insured throughout the tax year was penalized. This penalty has been eliminated. It is too early to tell how many people will choose to take advantage of this.
You’ll get a raise.
Due to the corporate tax cuts, companies are already shifting their financial situations, and many of these shifts could benefit middle-class earners. Many people have already reported seeing small increases in their paychecks.
Mortgage interest is still deductible.
Before the tax bill was passed, many experts were speculating what might be in it. Due to many circulating and changing tidbits of information, many people were unclear about the changes; a large concern for homeowners was the ability to continue to deduct mortgage interest payments. This is still possible, though there is a new cap on the amount: $750,000. (Any mortgage taken out prior to December 31, 2017 was capped at $1 million.)
Investors will keep more capital gains.
One of the most hotly-contested and divisive pieces of the new tax bill was the decrease in capital gains taxes. However, if you’re someone who benefits from capital gains (and many Americans do), then you’ll get to keep more of your ROI.
Moving expenses are no longer deductible.
Under previous tax law, an individual who relocated for their job could deduct any related expenses, including movers, gas, and more. This deduction will no longer be available. The idea behind this: since corporations have just received a large tax cut (some are saving billions of dollars in taxes), they can afford to incentivize employees to move using their own finances.
529 accounts don’t have to wait for college.
Originally intended to help parents save for their child’s future college tuition, a 529 can now be used to pay for up to $10,000 of primary and secondary education per school year. This is directly tied to the Trump Administration’s push for school choice, as these funds can be used for private and religious schools.
Estate taxes have been slashed.
Previously a highly-taxed source of income, beneficiaries of any estate can now double their deduction.
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