The New Tax Laws that Were Passed in the United States.

The New Tax Law Recently Passed That Will Mostly Begin Next Tax Season, and NOT This Tax Season (2017’s Taxes)

There have been new Tax Laws passed in The US recently! These laws have been passed through the house and senate, with many compromises between the parties added and updates made to them. Now that this has finally passed, we know that it will become law. So let us take a look at the new laws that will come to be to be…

1. New tax brackets
There are still the 7 different tax brackets based on the yearly income a person makes, however the overall rates have decreased! The new income tax bracket are at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Tax brackets continuously be limited, implying that you don’t pay the leading rate you receive on your entire earnings, simply the chunk of earnings that falls within the limits for that certain brace. For instance, if you’re single and also you have $42,000 in gross income in 2018, you’ll pay 10% tax amount on the first $9,525 of income; followed by paying a 12% tax obligation on the earnings between $9,525 and $38,700; and finally a 22% tax obligation will be used for the rest of the amount up to the $42,000 that was made. See the complete list of tax brackets with detailed information here: https://www.forbes.com/sites/robertberger/2017/12/17/the-new-2018-federal-income-tax-brackets-rates/

2. Standard deductions Increase
Now Taxpayers can still choose between a standard tax reduction or a detailing of their deductions. Starting in 2018 we are going to likely see a change towards a standard deduction being used as it has increase to $12,000 for singles, $18,000 for head of the family, and finally a $24,000 for weeded couples. As far as personal itemized exemption is now being capped, and plans to be fully phased out by 2025!

3. Itemized reductions capped
As stated before, most itemized reductions are going to be capped or rescinded. For example, neighborhood tax deduction will be capped at $10,000, and the home loan rate of interest reduction will be maxed out at a $750,000 home valuation. While all miscellaneous itemized deduction subject to the 2% modified gross earnings floor were rescinded. This is why we will start to see a change towards standard deductions from the normal used itemized reductions, simplifying the tax filing process significantly.

4. Child tax obligation credit doubles
Parents can no longer declare personal exceptions for their kids! However, they will now have the ability to assert a larger child tax obligation debt. Thus, the tax obligation reform bill has doubled the child tax obligation credit rating of $1,000 per child to $2,000 per kid, $1,400 of which will be refundable. The child tax debt revenue threshold has also increased; however, for parents that earn over $200,000 for a single parent, and $400,000 for a married couple, this child tax debt will be eliminated!
For taxpayers with non-child dependents get a bonus as well, in the form of a new, nonrefundable $500 tax obligation credit for each non-child reliant. This new credit rating relates to kids over the age of 17, elderly moms and dads, as well as adult children with a special needs.

When to expect these changes to begin…
When filing your taxes this year, know that most of the new tax reform bill changes will enter into effect during the 2018 tax year, and not for the 2017 year that you are filing. This means that when you’re preparing your taxes this April (April in 2018), you will NOT be applying these changes (with the exception of the new 7.5% AGI floor for the clinical expense reductions, which begins immediately). Nonetheless, when you do your 2018 tax obligations in very early 2019/late 2018, these new tax stipulations will certainly be a part of it! Make sure then that you know details of these new tax laws before filing.

These new tax laws has changed up the tax code quite a bit. The overall tax code has been simplified, and expect filing to be quite different, but should be quite a bit easier too! So when you prepare your taxes next year, make sure that you check, and even double check your work was done correctly with these new laws that have been passed into effect, as it will be the first time they come into play, says the team at Tax Refund Loans!