2018 Tax Updates!!
Big changes are going into effect in 2018 thanks to the massive new tax legislation that recently passed. These changes will not affect your 2017 tax return.
Here is a brief summary:
- Standard deductions nearly double. It will now be $12,000 for singles, $24,000 for married filing jointly and $18,000 for Head of Household
- No interest deduction for Home Equity loans
- State and local taxes can only be deducted up to $10,000
- Miscellaneous deductions on Schedule A are eliminated. This includes Employee business expenses, Tax prep fees etc.
- Alimony – for Divorces post 1-1-19, alimony is not taxable to the recipient or deductible for the payor.
- AGI limitation on Charitable giving is increased from 50% to 60%
- For upper income filers there is no longer a phase out of itemized deductions.
- Top tax bracket lowered from 39.6% to 37%
- Mandatory health care – still required for 2018 but not future years
- Child tax credit is doubled to $2,000 per dependent under age 17
- New $500 credit for each dependent who is not a qualifying child (parent, disabled adult)
- If you convert your IRA to a Roth, you will no longer be able to “recharacterized” it later. It must STAY in the Roth.
- Contributions to 401k’s and 403b’s have increased to $18,500 ($24,500 over 50 years old)
- 529 college savings accounts – now $10,000 a year can be pulled out tax free for tuition for elementary and secondary education.
- C Corporate tax rate down to 21% from 35%
- S Corporate pass through tax – big complicated changes – enough said.
- Medical expenses now only need to exceed 7.5% of AGI (used to be 10%) This one is retroactive to 2017 and only continues through 2018.
There is a lot more to the bill but these are the highlights that we believe will impact you the most. More details can be found in this article.
Another reminder: It is good to file your taxes as early as possible to help prevent identity theft. Some documents come late, and you/we have no control. Please submit your tax information to your tax preparer as early as you have most of the documents, so it can be at least partially prepared, knowing that you are just waiting on those 1 or 2 final documents. It will help speed up the process.
Please let us know if you have any other tax questions and we will help you find the answers.
Happy Tax Season!!