Once again, it’s tax time. The Tax Cuts and Jobs Act was passed back in December 2017, but it goes into effect with your 2018 tax return. So, what’s different? In short, everything.
For starters, there is a new 1040 form. It consolidates forms 1040, 1040A and 1040-EZ into a single sheet for all individual taxpayers. Additional schedules can be added to the form if you have a more complex return.
New Tax Brackets
The amount of taxes owed is also different for pretty much everyone, depending on your income.
MARRIED FILING JOINTLY
NEW TAX BRACKET
New Deduction Limits
There is an increase in standard deductions, but the new law completely does away with dependent exemptions as well as with the personal exemption. However, if you have dependents, there is a $500 nonrefundable credit for dependents other than children.
NEW STANDARD DEDUCTION
Married Filing Jointly
Head of Household
Increased Child Tax Credit
Families with children will notice the Child Tax Credit doubled this year. The amount of this credit that can be refunded also went up by $300 this year to a max of $1,400. Also, the salary limit where these benefits phase out for a married couple filing jointly went up from $110,000 to $400,000. So, many more families will be able to benefit from it this year.
Tax Year 2017
Tax Year 2018
Child Tax Credit
New Mortgage Tax Deduction Limits
For homeowners, there are some changes to the mortgage tax deductions based on the date of purchase. If you purchased a home on or after December 16, 2017, you can include paid mortgage interest on up to $750,000 of the principal value on your itemized deductions. If you took out a mortgage prior to that date, your cap remains at $1,000,000 of the principal value.
Interest paid on a home equity loan or line of credit remains deductible, as long as it was used to build or improve your home.
No More Breaks on Moving Expenses
However, if you bought a new home and are moving, you will find that the moving expense deduction has been suspended. Tax payers will not be allowed to deduct moving expenses until after 2025. Military personnel are the only ones still eligible to deduct moving-related expenses.
These are only some of the changes that went into effect with last year’s tax reform. If you’re filing your own return, do your research. Find a copy of last year’s return and inform yourself on the schedules that applied to you then and how this new law affects them. If you need help, think about consulting a professional until you get a handle on the new tax code.
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