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There are numerous changes to the 2018 tax year thanks to the Tax Cuts and Jobs Act. Commonly know as TCJA (pronounced tick-ja by nerdy tax accountants). There are changes to both individual and corporate tax law that are being implemented in tax year 2018.
Here are the top 6 tax law changes for individuals:
1. Tax Rates: Tax rates have been lowered and the tax brackets have also widened. There are still seven tax brackets but the income threshold for the rates have changed. Meaning more of your income has the potential to be taxed at a lower rate.
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2. Personal and dependent exemption: These exemptions have been eliminated completely for tax year 2018. In the past, taxpayers would get an exemption for themselves, their spouse, and any dependents. For tax year 2017, the exemption amount was $4,050.
3. Standard deduction: The standard deduction has nearly doubled. The standard deductions for married filing jointly couples has increase from $12,700 to $24,000. Click here to use TurboTax Calculators and Tools. Estimate your refund and more. This is great news, but it means less people will be able to itemize their deductions. Since the standard deduction is so high, it will be harder to have more itemized deductions than the standard deduction.
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4. Child Tax Credit– The child tax credit has doubled and will be $2,000 per qualifying child in 2018. The phase-out limit has also increased from $110,000 to $400,000. Meaning if your income is under $400,000 in 2018, your credit will not be limited. Also, the credit is now partially refundable! Check out the complete guide.
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5. State & Local Taxes– TCJA has limited the amount of state and local income, property and sales tax you can deduct to $10,000. These deductions are part of your itemized deductions on Schedule A. There has not been a limit to these deductions in the past. So this will be a game changer for many taxpayers who itemize their deductions.
6. AMT Exemption– The Alternative Minimum Tax exemption has increased from $84,500 to $109,400 (MFJ). This exemption reduces the income subject to AMT. So this will reduce the amount of taxpayers subject to AMT in 2018.
As you can see there are many changes- not all bad – not all great. One thing for sure is this tax bill will affect everyone differently. 30% Off E-file.com with this link