How is the new tax law going to impact your taxes? On December 20th Congress approved the Tax Cuts and
Jobs Act (H.R. 1) which provides the most significant changes to the tax code in 30 years. The act will have enormous implications for every business and individual. We have included a PDF of the changes which you can see by clicking on the picture to the right.
As with any other tax bill, some will be saving money come tax time, while others will be paying more taxes. We run our office out of Newtown, PA and assist clients with their taxes from the greater Philadelphia area through New Jersey. As we have fielded calls from clients in these regions we have realized that there are a few pressing questions:
- When does the new tax law take effect? The new rules and regulations will impact your 2018 tax returns, due April 15, 2019. The new tax law will not change your taxes for 2017.
- Does this impact the standard deduction? Currently (for your 2017 taxes) the standard deduction is $12,700 for those filing jointly and $6,350 for single taxpayers. The new tax law increases the standard deduction for joint filers to $24,000 for joint filers and $12,000 for individuals. Additionally, the act repealed the personal exemptions.
- What will my new tax bracket be? Tax brackets are complex to understand, but essentially, your income dictates the percentage of tax you pay. For 2018, the tax brackets have been adjusted, with the highest tax rate set at 37%.
- Have there been any changes to the mortgage interest deduction? Beginning in 2018, your mortgage interest deduction may be limited to debt of $750,000. Additionally, you will no longer be able to deduct the interest on a Home Equity Line of Credit starting in 2018.
- I’ve heard a lot about my state and local tax deduction (SALT), can you give me more details? Deductions for state and local taxes, included real estate taxes, will be limited to $10,000. For some taxpayers, it may be worthwhile to pre-pay your 2018 tax before the end of 2017.
- Have there been any changes to how alimony is treated? Yes, beginning in 2018, individuals will no longer be allowed to take a deduction for alimony paid and it is no longer income for those who receive alimony.
As you can imagine, there are many other changes that will impact businesses. The good news is that our team has thoroughly read through the new law and is ready to assist you with all your questions. Although these changes will not impact your 2017 tax returns, they will impact your 2018 paycheck. Now is the time for us to work with you to map out a new tax strategy.