The IRS just announced that the 2019 tax season will start on January 28, 2019 despite the ongoing government shutdown. The IRS will begin accepting paper and electronic tax returns that day.
The Tax Cuts and Jobs Act brought about many changes for the coming tax return filing season. The following are the Five Key Tax Changes for your TY 2018 Tax Filings.
- Personal and Dependency Exemptions Eliminated
Before the enactment of the Tax Cuts and Jobs Act, the exemption amount was scheduled to be $4,150 for 2018. So, for a single taxpayer, the personal exemption would have sheltered $4,150 from tax in 2018. And for a family of four, the elimination of personal exemptions potentially exposes as much as $16,600 of income to tax in 2018.
- Standard Deductions Increased
For 2018, the new law sets the standard deduction at:
$24,000 for married individuals filing joint returns and surviving spouses,
$18,000 for heads of households, and
$12,000 for single taxpayers as well as married individuals filing separately.
- Itemized Deduction Changes
The Tax Cuts and Jobs Act makes a number of changes in the rules for taxpayers who itemize deductions. Two key changes most likely to affect individual clients who have claimed itemized deductions in prior years are:
State and local tax deductions. For 2018, the new tax law places a $10,000 limit on itemized deductions for state and local income and property taxes. The deduction limit is $5,000 for married individuals filing separately.
Mortgage interest deductions. The Tax Cuts and Jobs Act limits mortgage interest deduction to the interest on $750,000 ($375,000 for married individuals filing separately) of acquisition debt. The reduction in the dollar cap for acquisition debt does not apply to debt incurred on or before Dec. 15, 2017, or certain debt incurred pursuant to a binding contract entered into before that date.
- New Tax Rates
Under prior law, an individual taxpayer’s taxable income was taxed at a graduated rate of 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. The new law reduces the rates to 10%, 12%, 22%, 24%, 32%, 35% and 37%.
- Child Tax Credits Increased
The new law doubles the amount of the credit from $1,000 to $2,000 per qualifying child (income limitations and phaseouts apply). However, the new law requires the child must have a Social Security number (SSN) to be a qualifying child eligible for child tax credit. The new law creates a new $500 nonrefundable tax credit for dependents who do not qualify for the regular child tax credit, including children under 17 who do not have an SSN.
