It’s the day of the year that makes millions of taxpayers nervous, thousands of IRS employees happy and ALL accountants work overtime.
And, all three of those groups should know that tax laws change year to year. There were major changes passed by the U.S. Congress and signed by President Trump last year that all taxpayers and business owners should know.
Here are some new tax laws (2018) that you should keep in mind as you file your taxes in 2019:
- Standard Deductions increased: Married and filing jointly increased from $13,000 to $24,000. Single taxpayers and those who are married and file separately have an increase from $6,500 to $12,000. Heads of households went from $9,550 to $18,000.
- Personal Exemption: The $4,050 personal tax exemption has been eliminated.
- The top income tax rate changed: Individuals with incomes of $500,000 or higher will be at the new 37 percent top rate. Those filing jointly at $600,000 or up and married will be at the top rate. (The top tax brackets are found here.)
- Child Tax Credit: It is now worth up to $2,000 per qualifying child. The age cut-off is still 17. (Children must be under 17 at the end of the year to claim the credit). The refundable portion is now only $1,400. The earned income threshold for the refundable credit is lowered to $2,500. Phase out for the child tax credit increases in 2018 to $200,000 ($400,000 for joint filers). The phase out applies to the new $500 credit for other dependents. (Child must have a valid SSN to qualify for the $2,000 Child Tax Credit.)
- Home Equity Loans: It limits the deductibility of mortgage interest up to $750,000 of debt used to buy a home. It also does not allow deducting the interest on home equity loans.
- Moving expenses eliminated: Once, over a million taxpayers claimed this deduction. This exemption has been totally scrapped. Only member of the military on active duty can claim this deduction.
- Tax Preparation Fees are eliminated: Fees you paid to your accountant or tax preparer were once combined with other miscellaneous deductions and deductible to the extent the total exceeded 2% of your adjusted gross income. Unfortunately, this deduction has also been deleted.
- Job expenses: In the past deductions for licenses, medical tests, tools, clothing and equipment were deductible. They can only now be deducted by the employer.
- Parking and transit fees: Up to $255 per month from their employer towards parking and transit costs were allowed. Employers could also deduct these reimbursements, which were also tax-free to the employee. Employers can no longer deduct these reimbursements.
So, as you can see, filing your individual, married or business taxes from 2018 will look much different than they did in the past. Many of these changes will make filing less complicated for some and more complicated for others. If you are unsure of what you can claim, consult your licensed tax accountant or tax adviser.
A.K. Burton, PC, has experienced and licensed tax advisers who are quite knowledgeable of the 2018 tax law changes. They can assist you or your business in filing your taxes and also represent you to the IRS. We serve Bethesda, MD