There are some important 2018 tax changes. If you haven’t filed your taxes, yet, then make sure that you know about these changes. In some instances, adapting to the changes might save you money. Everyone wants to get the most they can back from their tax refund so don’t let the changes mess that up for you.
2018 Tax Changes Come From Tax Reform Bill
These 2018 tax changes are coming as a result of the Tax Reform Bill. It is better known as the Tax Cuts and Jobs Act (TCJA). This bill passed in late 2017. However, the changes didn’t go into effect right away. That’s why you didn’t notice it last year when you filed your 2017 taxes.
It’s time now for those changes to go into effect, though, so it’s important to review the bill. There are changes that impact individuals, businesses, tax-exempt entities, and governments. However, we’ll only be looking at the 2018 tax changes for individuals in this article.
Overall, the Changes Should Make Filing Taxes Easier
One of the biggest changes is that the standard deduction has been expanded. Therefore, people who previously took itemized deductions may now be able to get as much (or more) money back just using the standard deduction. As a result, this simplifies taxes.
Many other deductions have been taken away. For example, you can no longer take a deduction for job searches or moving expenses. Therefore, you’ll probably benefit from just taking the standard deduction.
That said, if you do your own taxes, you may find that you need to figure out your itemized deductions first. That’s the only sure way to calculate whether you get more back from the standard deduction or not. Therefore, it might not save you as much time as it should.
If you want to save time and are willing to take the chance that you may or may not save money, then just take the standard deduction. In most cases, it’ll be the right thing to do. The standard deduction has almost doubled, which means that most people won’t save money with itemized deductions.
On the other hand, these 2018 tax changes are designed to last until at least 2025. Therefore, you might want to do the math this year, see if the standard deduction truly makes sense for you, then use that information when filing in future years.
The Changes Benefit Low and Mid-Income Filers
The people who benefit the most from these changes are those who are low-income or middle-income. They are most likely to get more back from the new standard deduction. Tax Foundation reports that the use of itemized deductions will drop more than 70% for people with an income between $10,000 and $50,000. Furthermore, it will drop at least 63% for people earning between $50,000 and $200,000. Therefore, if you earn less than $200,000 then chances are that you benefit from the new standard deduction.
Additional 2018 Tax Changes
Here are some other important things to know:
- Fewer people will need to pay the Alternative Minimum Tax Liability.
- The maximum credit for the Child Tax Credit has increased so it pays to have kids.
- Furthermore, there’s a new additional credit for other types of dependents.
- Tax brackets have changed, generally lowering marginal tax rates.
- If you are self-employed or a small business owner, there are additional changes to learn about.
There’s one more important thing to note. Due to the 2018 tax changes, many people had less money taken out of their paychecks this year than in years past. If that’s true for you, then your refund will likely be smaller than years past as well. Even though you may pay less in taxes, you get less back because you paid in less.