Impact of the New Tax Laws

Impact of the New Tax Laws

The Tax Cuts and Jobs Act was signed into law by President Trump on December 22, 2017.  The sweeping tax reform reduces tax rates for individuals and corporations, and repeals many deductions.  The goal was to significantly simplify the tax filing process.  At least, that was the goal!

Some of the biggest changes include:

·         New tax brackets – lower and broader

·         Standard deductions – higher

·         Personal exemption – eliminated

Standard deductions, or the amount one takes as a deduction if one does not itemize, will now be:

                $12,000 Individual Taxpayers or Married Filing Separately

                $18,000 Head of Household

                $24,000 Married Filing Jointly

The Internal Revenue Service has special, higher standard-deduction amounts for taxpayers age 65 or older.  There is also a similar break for the blind or persons with disabilities, regardless of age.  Those who qualify, need to file their taxes using either a 1040 or 1040A tax form.  (The 1040EZ will not work if taxpayers wish to take advantage of the higher amounts.)

Additional amounts if age 65 or over, blind or disabled:

                $1,600 Unmarried individuals

                $1,300 Each spouse meeting criterion

Changes continue with the Child Tax Credit, and a temporary credit for non-child dependents. The Child Tax Credit increased to $2,000 per qualifying child and will be refundable to $1,400 subject to phaseouts.  The temporary tax credit for non-child dependents is a $500 nonrefundable credit for other qualifying dependents such as elderly parents or adult children with disabilities.

There are changes to the Property Tax deduction and Mortgage Interest deductions, to include very specific guidelines for Home Equity Loans and Lines of Credit.  State and Local Tax (SALT) deductions now have a $10,000 cap.

Estate taxes, charitable contributions, alimony payments, and medical expense deductions have all seen changes.

Big changes are happening with Health Insurance.  Beginning in 2019, the penalty for not having insurance is eliminated.  Those who forego health insurance in 2018 could still face the penalty.

Many deductions have been eliminated or modified.  This means fewer people will benefit from itemizing.  Many folks will be impacted by the elimination of things like Unreimbursed Employee Business Expenses, and tax preparation fees.  There are many more!

Corporations and Pass-through entities are seeing benefits in the form of lower tax rates or new deductions for qualified business income. 

Taxation methods for Multinationals have changed significantly.

In short, there are changes that affect all of us!  We need to start planning now, to take advantage of the changes and avoid unpleasant surprises when we file our taxes next year.  This brief explanation of changes is not to be taken as tax advice.  It is for the purpose of enlightenment only.  Please consult a tax professional such as Arizona Tax Advisors for complete details.

Also remember that at Arizona Tax Advisors we offer: personal tax service, tax accounting services, business valuation, small business tax preparation, online tax preparation services, specialty tax services, personal tax return preparation, corporate tax preparation, tax and bookkeeping services, taxation accounting, cryptocurrency tax, us tax return preparation, local tax preparation services.