Please note, this content was written for informational purposes only, consult your own tax or accounting professional before filing your taxes.
Our tax blog summarizing the Tax Cuts and Jobs Act was one of the most read blogs of 2018. The new laws that were passed in late 2017, will go into effect with your 2018 tax return that is due April 15,2019. As a reminder, one thing that will make an impact is the change in the dollar amounts and percentages of the 7 different tax brackets. Here’s the breakdown so you can see which bracket you fall into.
A new W-4 form was also released in February of 2018. A W-4, simply put, is the form you fill out when you start a new job. The W-4 determines your withholding from your paycheck. You can update this at any time even if you haven’t recently changed jobs. A copy of this form can be found here. Give your updated form to your payroll department. They will ensure the changes are recorded properly in your payroll record.
Next, there are new amounts for a standard deduction. As a taxpayer you can chose to take the standard deduction or itemize your deductions. For a single filer (or if you are married but filing separately), the deduction has increased from $6,350 to $12,000. For Head of Household, the deduction has increased from $9,350 to $18,000. For married couples, the standard deduction has increased from $12,700 to $24,000.
Normally about 30% of taxpayers file their returns utilizing itemized deductions. Because of the increase in the standard deduction amounts, be sure to compare your total itemized amounts to the new standard deduction. It could make sense to claim the standard deduction this year.
Also, educate yourself on the itemized deductions that have new limits, or if you are no longer eligible to deduct that item at all. A $10,000 limit was added to SALT (State and Local Tax itemized deduction). Property taxes are local taxes that would be included in the new limit. Some common deductions – like your tax preparer fees – are no longer deductible starting with this filing. Other deductions that have gone by the wayside include un-reimbursed employee costs, moving expenses, employer-subsidized parking, loses due to theft, and union dues.
This is a high-level glimpse of some of the inaugural changes our 2018 tax returns will experience. We hope this inspires you to meet with your own tax/accounting professional before filing your 2018 return.