Tax Changes You Need to Know for 2018
Posted Jan 23, 2019
Unless you’ve completely gone off the grid or have fallen into a fairy tale-like 100-year sleep, only to be woken by true love’s kiss, you probably know that Congress passed major tax reform for the 2018 tax year. But what does the Tax Cuts and Jobs Act mean for you? Keep reading for some of the biggest tax changes for individuals under the new tax regime.
The standard deduction for single taxpayers has increased from $6,500 to $12,000.
If you’re married filing jointly, your standard deduction increased from $13,000 to $24,000.
If you’re head of household, the deduction is now $18,000 up from $9,550.
Not only does this mean bigger deductions for those who normally claim the standard deduction, but now more people will benefit from taking the standard deduction as opposed to itemizing. Your tax filing situation may have become simpler.
The personal exemption ($4,050 in 2017) has been eliminated under the tax reform bill.
Income Tax Brackets
While there are still 7 tax brackets, the income thresholds have changed. Several of the tax rates are also lower.
The current brackets are: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%
The new brackets will be: 10%, 12%, 22%, 24%, 32%, 35% and 37%
Child Tax Credit
The child tax credit has been raised from $1,000 to $2,000 per child. Additionally, a $500 credit is available for dependents who do not qualify for the $2,000 credit (because they are 18 or over, for example).
State and Local Taxes
The deduction for state and local taxes is capped at $10,000 for income and property taxes combined paid during the year.
Alternative Minimum Tax
The income exemption for AMT was raised from $84,500 in 2017 to $109,400 in 2018 if you’re married filing jointly and $54,300 to $70,300 if you’re single (amounts will be adjusted for inflation).
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