2018 Tax Changes
by St. John & Assoc on May 10, 2018
Now that most of us have our 2017 tax returns behind us, focus is on to 2018. The Federal tax code was substantially changed for this year. You should be aware how it is likely to affect you and plan accordingly. The Tax Cut and Job Act of 2017 was made effective by a 50% majority vote (rather than 2/3%) of Congress and as such will expire in 2026 unless extended or ratified by a 2/3% vote by both houses of Congress. Here are the major changes involving individual returns:
- The tax brackets have been widened and the rates reduced so that many taxpayers will be in a lower tax bracket then they were in 2017.
- The standard deduction has been increased to $24,000 for joint returns and $12,000 for individual returns. It is estimated that this standard deduction amount will exceed taxpayer’s individual deductions for 85% for all taxpayers especially with the changes made in the itemized return mentioned below. This will simplify the return preparation for many to the extent that a short form (one or two-page return) may be filed.
- In exchange for the increase in the standard deduction amounts and lower tax rates, some itemized deductions have been eliminated and others capped. Personal exemptions have been suspended. Charitable deductions, casualty losses, and miscellaneous deductions categories including professional fees have been eliminated. Medical expenses are deductible to the extent that they exceed 7 1/2% of your adjusted gross income, interest, local, county, and state tax deductions have been capped.
- There is an increase in child tax credit and a new family tax credit.
If your family dependents are of legal age and will have earned income, there is now the opportunity for them to file their own tax return and be eligible for a $12,000 standard deduction which in most cases will make their earned income free from Federal tax except for Social Security and Medicare tax withholdings.
- By Richard St. John, Founder & President