We know it’s not even Christmas yet, but some of you are probably wondering what the new tax law will mean for your finances heading into 2018. The news can’t decide if the changes are good or bad, but the answer for you will depend on your individual circumstances. Here is some basic information to help give you an idea of what to expect, but don’t worry. This is what we do best.
Standard Deduction Doubled
You may be familiar with the standard deduction. Many people use it rather than itemizing. For 2018, the amount of the standard deduction will roughly double:
- $12,000 for single filers, up from $6,350
- $24,000 for married filing jointly, up from $12,700
- $12,000 for married filing separately, up from $6,350
- $18,000 for heads of household, up from $9,350
This means that many of you may receive more money back when you file your taxes. This increase is balanced by changes to many deductions.
Deductions and Exemptions Removed
The increase in the standard deduction is balanced by the removal of several individual deductions and exemptions, including all of the miscellaneous itemized deductions. Many of these apply to specific life circumstances, so they may or may not affect you. Examples include:
- The personal exemption (an amount claimed against income for the filer and each dependent;
- The unreimbursed employee business expense (when an employee pays business expenses out of their personal funds—such as nurses, salespeople, and educators); and
- The home office deduction (for those who work out of their homes and pay for services related to their work).
While many deductions were removed, some of the most commonly used were preserved, though altered.
- The mortgage interest deduction was limited going forward. It will only apply to a mortgage to purchase, renovate, or build your home up to $750,000 (up to $375,000 if married filing jointly).
- The medical expenses deduction was made more accessible by lowering the floor to deduct such expenses from 10% of income down to 7.5% of income.
- The child tax credit was expanded to $2,000 per qualifying child and is potentially refundable up to $1,400.
There are many changes starting with your 2018 taxes that will affect whether you get more or less back when you file. It can seem very confusing and overwhelming, but we are here to help you when the time comes. You don’t have to do it alone.