12 Big Tax Changes for 2018
Lifestyles

12 Big Tax Changes for 2018

If you've watched any news this year, you'll know that sweeping tax law changes are coming. But, how will they affect you and your family?

957
Thought Catalog via Unsplash

Big tax changes to consider for 2018: If you watch the news and keep up with current events, you will know that in recent months, the House and Senate have renegotiated and revamped many of the tax laws. After many months of back and forth, the changes are here and there are some things that you need to know. Here are the changes you can expect to see this coming tax season.

1. Tax Bracket Changes

Tax exemptions and rates are primarily based upon income and there are still 7 major tax brackets to consider. Take the time to view the below information to first see where you fall in line with these 7 income levels. Note that there is now a new lower top tax of 37%. This is, in fact, lower than previous rates proposed by the senate and house majority.

Ok, let's meet the tax brackets:

• 10% Tax $9,525 individuals; $19,050 for married couples and those filing jointly
• 12% Tax between $9,525 and $38,700, individuals; $19,050 to $77,400 filing jointly
• 22% Tax between $38,700 and $82,500, individuals; $77,400 to $165,000 jointly
• 24% Tax between $82,500 and $157,500, individuals; $165,000 to $315,000 jointly
• 32% Tax between $157,500 and $200,000, individuals; $315,000 to $400,000 jointly
• 35% Tax between $200,000 and $500,000, individuals; $400,000 to $600,000 jointly
• 37% Tax over $500,000 individuals; over $600,000 jointly

2. Deductions

This year, filers have the ability to deduct lower than their taxable income. This is due to the double standard deduction policy. Single filers can utilize between $6,350 to $12,000 and those filing jointly can file between $12,700 and $24,000 deductions. These higher figures are the result of eliminating many of the traditional deductions allowed to tax payers. It is likely that more tax payers will choose this avenue as opposed to itemizing deductions. If your Adjusted Gross Income (AGI) is below $66k, you might even be able to file simple taxes for free. (But, most people don't qualify!)

3. Personal Exemptions Scrapped

This year, filers have the ability to deduct lower than their taxable income. This is due to the double standard deduction policy. Single filers can utilize between $6,350 to $12,000 and those filing jointly can file between $12,700 and $24,000 deductions. These higher figures are the result of eliminating many of the traditional deductions allowed to tax payers. It is likely that more tax payers will choose this avenue as opposed to itemizing deductions.

4. Higher Medical Expense Deductions

Medical expenses could previously be deducted for up to 10% of your gross adjusted income. The figure has been lowered to 7.5% for this season and beginning in 2019, there is no longer a penalty in place for not having medical insurance.

5. Fewer Taxpayers Hit AMT

The Alternative Minimum Tax (AMT) is placed on those claiming higher income as a separate tax. The new exemption amount for the AMT is up to $109,400 for those married and filing jointly and to $70,300 for those filing as single. Exemptions phase out at $1 million for married filers and $500,000 for single filers. This means that fewer people will reach the AMT threshold.

6. What About Family Exemptions?

As stated above, the $4,050 that was the standard for filing dependents has been eliminated. Those will larger families will be affected most as they will no longer be able to take advantage of that sometimes large tax break.

7. Higher Child Tax Credit

The above deduction being taken away might seem like a let down to some families, but luckily, the government has made up for it. They have chosen to increase the child tax credit from $1,000 per child to $2,000. This tax credit is for single parents with a reflective income of up to $200,000 and married couples and those filing jointly for up to $400,000. There is also a new $500 credit for adult dependents.

8. 529 Plans Used Outside of College Expenses

Private school kids are getting a bit of an upgrade with 529 plans coming available for use in grades K-12. Up to $10,000 per year can be used from the college savings program for primary private school education. These funds, however, do not cover homeschooling expenses. The top tax software actually offers special codes just for students.

9. Lower Mortgage Interest

Homeowners get a break with the ability to deduct interest on their current home up to $1 million, but those looking to purchase a home will have to contend with a cap of $750,000 for deducted interest.

10. State, Local, and Property Tax

The debate lingers as to which states allow for state and local tax deductions, but it is still available for taxpayers to deduct their property tax, and either sales tax or income, but only up to $10,000. So, can you get out of that state tax bill? Um, no. Haven't you heard that quote about death and taxes?

11. Corporate Tax Rate Drop

Corporate taxes were on the table this year and those taxes have been reduced drastically from 35% to 21%. This is currently the largest drop in history and as of 2026, the change will become permanent. This tax cut has certainly given a short-term boost to Wall Street, but the jury is out on the long-term benefit to Main Street.

12. Pass Through Business Lower Tax Rates

Partnerships, S Corporations, and Sole Proprietorships are known as pass through businesses. These businesses have historically been saddled with high self employment taxes while larger businesses benefit, but these companies are now allowed a bit of a break. Pass through business owners are now allowed to deduct up to 20% of their total annual income instead of resorting to itemization as in years past.

In conclusion: Taxes evolve with time and this year has certainly been a doozy of change for the 2018 tax season. If you have yet to brush up on the new laws and see where you stand, it is time to take advantage of the space between now and filing day and find out which laws you are subject to following and which ones you may be exempt from. As always, file your taxes responsibly to ensure that you never have to hear the most frightening word of all, "AUDIT." Happy (almost!) Tax Season!

Report this Content
This article has not been reviewed by Odyssey HQ and solely reflects the ideas and opinions of the creator.
Politics and Activism

I Was At The Atlanta George Floyd Protests, Here's What It Was Like Before The Violence Started

What started out as a peaceful protest quickly resulted in destruction, with mixed opinions leading narratives on both sides.

When I heard about the protests happening in my city in honor of George Floyd, a black man who was brutally and fatally detained by police in broad daylight, I was conflicted about the best way for me to support a cause that I was passionate about. The senseless killings of people of color in America had been weighing on me, and I was eager for a way to help, to do my part. I wanted to be out on the ground with my community, having our voices heard. However, there was the issue of the coronavirus, a very real and troublesome threat that is still controlling our daily lives.

Keep Reading... Show less
Health and Wellness

If You Can Eat Crap And Stay Thin You Aren't Healthy, You're Lucky

A high metabolism isn't a get-out-of-jail-free card!

Photo by Tarutoa on Unsplash

Everyone has that one friend — the one who eats to their heart's content but never gains an ounce. Meanwhile, you feel like you gain five pounds just stealing a glance at a hamburger! My childhood best friend was like that, much to my chagrin. Anyone who hadn't witnessed her eat might be tempted to say that she was thin because of her diet, but she would sometimes eat a bag of Sour Patch Kids as a "meal." One time, I watched in awe as she chowed down on a "salad" made up of one part romaine lettuce, two parts shredded cheddar cheese, and two parts French dressing — it was nothing more than a red lake of dressing with bits of green and orange debris floating in it. Clearly our definitions of "salad" were quite different, as were our perceptions of a balanced meal.

Keep Reading... Show less
Swoon

I Started Dating A Guy Before Quarantine, But Now We Rarely Speak Unless I Double-Text

"He's really nice and cute and I like being around him when we see each other, but he's awful at communication."

Each week Swoonie B will give her advice on anonymous topics submitted by readers. Want to Ask Swoonie B something related to dating and relationships? Fill out this form here — it's anonymous.

Keep Reading... Show less
Lifestyle

This Is Exactly What You Should Eat Today In Quarantine, Based On Your Zodiac Sign

You've probably been eating it the past three months,

If we added up all the minutes of my life I've stood in front of the fridge or pantry mindlessly glazing over options, it would probably amount to several years longer than I'd care to admit.

Keep Reading... Show less
Health and Wellness

If You Don't Think People Are Legitimately Scared To Stay In Lockdown, Think Again

People are terrified of what could happen if states stay in lockdown too long.

Coronavirus (COVID-19) continues to be the topic of discussion for most U.S. residents. From federal reopening guidelines to individual state timelines, the country is all over the place. This sparks conversations within the news, social media, and in family homes about the consequences of reopening the country incorrectly.

Keep Reading... Show less
Health and Wellness

If You Don't Think People Are Legitimately Scared To Reopen States, You're Not Looking Hard Enough

People are terrified of what could happen if states begin reopening too early.

Coronavirus (COVID-19) continues to be the topic of discussion for most U.S. residents. From federal reopening guidelines to individual state timelines, the country is all over the place. This sparks conversations within the news, social media, and in family homes about the consequences of reopening the country incorrectly.

Keep Reading... Show less
Facebook Comments