In the last phase of the year 2017, President Donald Trump signed the new tax bill into law. Initially, this new tax law did not affect individual income earners until the beginning of the 2018 tax year which has to be filed in the first quarter of the year 2019. Basically, the degree on which you will be affected by this new tax law will depend on a number of factors; like your income, the deductions that you take, as well as your present filing status.
One of the supposed main highlights of the tax law was that the tax brackets would have to be to cut from seven (7) to four (4). Although this did not work as planned, the seven brackets still exist, the difference is that the rates have been changed. Right before this bill was signed into law, the previous tax law had one of the rates of the bracket rise to 39.6%. From January, the new rates for each of the brackets are; 37%, 35%, 32%, 24%, 22%, 12%, and 10% respectively. With 37% being the highest, unlike the previous rate that rose to 39.6%. Bear in mind that this rate will affect the income you make during 2018, so when you file your taxes in 2019, these rates will determine how much you will pay as tax.
Increase In Deductions
One of the main highlights of the new tax law that should affect you is the fact that the standard deduction is doubled for all tax filers. Single filers or married couples that file separately have a standard deduction of $12,000 while couples filing together (otherwise referred to as joint filers) have a deduction of $24,000 while household heads get a deduction of $18,000.
Another main feature of this new tax law that could affect how you file your taxes this year is the SALT (State and Local Tax) deduction. While it has been revealed that most Republicans opted for the elimination of all itemized deductions, the new tax law capped the SALT deductions to $10,000. Prior to this time, taxpayers who filed for their federal tax could decide to deduct their state and local income as well as their general sales as long as they have itemized. This format was quite helpful for residents in states like New Jersey and California that have higher tax rates.
Changes In Mortgage Interest Deduction
Prior to the sign of the tax bill into law, taxpayers who filed for their 2017 tax were able to deduct mortgage payments up to $1 million. This new law signed by the President has changed the mortgage interest deduction to $750,000 for couples or joint filers. Single filers or married people filing separately have a limit of $350,000.
Changes In CTC (Child Tax Credit)
Under the old law, the child tax credit was $1,000 now it is $2,000 and has been made available for more taxpayers as well. Under the old law, taxpayers would need to have an income of $75,000 for single filers and $110 for joint filers if they are to qualify for the credit. The new law states that you need to have $200,000 as a single filer and $400,000 as a joint filer. Currently, the CTC is now refundable. This means that if in the event that the child tax credit brings down your tax liability to zero, then the IRS will send you a refund which would be up to $1,450.
The new tax law will definitely affect you in so many ways and may overwhelm you. To ensure that it does not, you can seek the help of an experienced Atlanta tax attorney.
