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8 Changes Impacting Your 2018 Tax Return

Posted On January 30, 2019

Despite the recent government shutdown, the Internal Revenue Service (IRS) announced the official tax season opened Monday, January 28th.  This year will be the first year tax payers’ returns are impacted by the Tax Cuts and Jobs Act (TCJA).  When you file your 2018 return, expect it to be influenced by some or all of these 8 changes.

 

  1. Lower Individual Tax Rates – The TCJA maintained the seven tax rate brackets, but lowered five of the rates. Below is a breakdown of the 2018 Individual Federal Income Tax Brackets.

 

Single

Joint

Head of Household

10% Tax Bracket

$0 – 9,525

$0 – 19,050

$0 – 13,600

Beginning of 12% Bracket

$9,526

$19,051

$13,601

Beginning of 22% Bracket

$38,701

$77,401

$51,801

Beginning of 24% Bracket

$84,501

$165,001

$82,501

Beginning of 32% Bracket

$157,501

$315,001

$156,501

Beginning of 35% Bracket

$200,001

$400,001

$200,001

Beginning of 37% Bracket

$500,001

$600,001

$500,001

 

  1. Larger Standard Deduction, No Personal Exemptions – While the TCJA has nearly doubled the standard deduction, personal and dependent exemption deductions (which would have been $4,150 in 2018) were eliminated. However, additional standard deduction amounts for the elderly and blind were maintained from the prior law. Below are the updated standard deductions.

 

2018

2017

Single

$12,000

$6,350

Joint

$24,000

$12,700

Head of Household

$18,000

$9,350

 

  1. New Limits on State and Local Tax Deductions – The TCJA will limit your deduction for state and local income and property taxes to $10,000 if you are married and filing jointly and $5,000 if you are single. This will have the greatest impact on tax payers who live in areas with high state or local taxes. 
  2. New Limits on Mortgage Interest Deductions – for mortgages originated before 12/15/17, there will be no change. For those originated after 12/15/17, the TCJA will reduce the amount of mortgage debt on which you can claim itemized interest expense deductions.  The new limit is $750,000 if you are married filing jointly or $375,000 if you are married filing separately. 
  3. Child Tax Credit Increased – The TCJA doubled the maximum child credit to $2,000 per qualifying child and up to $1,400 of your credit can be refundable, even if you don’t actually owe any federal income tax.
  4. New $500 Tax Credit for Other Dependents – The TCJA also introduced an additional $500 tax credit for qualified dependents other than minor children. (Think: your mother-in-law who lives with you!)
  5. No Breaks for Moving Expenses – Unfortunately, the TCJA has eliminated moving expenses except military personnel. Additionally, those who receive employer reimbursements for moving expenses will have to pay taxes on it, again except for military personnel. 
  6. New Limit on Itemized Deductions for Personal Casualty – Under the TCJA, you can only deduct personal casualty loss if they occur because of a federally declared disaster. If you were a victim of a federally declared disaster this year like a wildfire or hurricane, consult your local tax professional to find out more.

 

The TCJA was the largest tax overhaul since 1986.  If you have specific questions about how the new law will impact your 2018 return, consult a tax professional. 

 

Sources: Forbes, MarketWatch