Many Americans will begin experiencing the effects of the Tax Cuts and Jobs Act of 2017 when they file their annual returns this year. There are changes that affect consumers at different income levels and parts of the country that make it a good idea to seek advice from a qualified tax professional to ensure compliance with the new law and maximize available benefits. The changes in tax rates have been the most apparent benefit to most people; however, things get more complicated when income, state of residence, employment status and exemptions come into play.
Professional advice is more important than ever, more people in the lower and middle income classes will be able to take the standard deduction, which is almost double what it was. But rules surrounding itemized deductions have changed and can vary greatly depending on whether the state a taxpayer lives in has modified their codes to respond to changes at the federal level. Taxpayers should ask questions and get solid guidance if they fit into or are affected by one of the following categories:
This increased from $6,500 to $12,000 (single) and $13,000 to $24,000 (married). People over 65 can increase this by $1,300 for married individuals and $1,600 for singles.
Personal and dependent exemptions have been eliminated and have been replaced with credits, but they are predicated on adjusted income levels. Child tax credits increased from $1,000 to $2,000 per child under 17 years of age. A new partial child tax credit is available for dependents age 17+.
Mortgage interest deductions have been capped. Homeowners are now only allowed to deduct interest on a maximum of $750,000 for properties purchased after December 14, 2017. Home equity interest deductions are eliminated for loans not used to buy, build or improve the property securing the loan.
The ability to deduct these taxes is capped at a sum total of $10,000.
All miscellaneous deductions have been eliminated for individuals including employee business expense deductions and investment-related expenses.
Spousal support – a.k.a. alimony – paid is no longer deductible by the payer or includable for the recipient for payments made under divorce agreements signed after 12/31/2018.
Corporations, S-Corps, sole proprietors, partners and other groups got tax relief in the form of income deductions and rate reductions.
Undoing a transfer of funds from a traditional IRA to a Roth IRA is no longer allowed.
The cost of a qualified professional is often offset by the savings their expertise can help consumers achieve by knowing all the rules. And, there’s really no way to put a price on the protection and peace of mind you’ll get from working with people who know the laws and how they affect you.
The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from an accountant or financial adviser.
