These are some key points of the new tax law for 2018.
Standard deduction
The most important changes: the standard deduction have been increased from $ 6,350 for individuals and $ 12,700 for couples to $ 12,000 for individuals and $ 24,000 for couples.
More people will be able to use the standard deduction instead of the detailed deduction.
Mortgage interest and charitable contributions
Other deductions will be much less important, such as mortgage interest deductions and charitable contributions.
You will not get a tax relief on both the mortgage interest and the charitable contributions, this can make the charities nervous.
Should you detail or not in 2018?
Many people will choose not to detail because the standard deduction in 2018 is much larger than before.
State, local and property taxes
If you detail, there will be limits for state, local and property taxes, in 2018, the limit is $ 10,000, before there was no limit.
Tax credit for children
The child tax credit has doubled to $ 2,000 of $ 1,000. The income limit has also increased. In 2017, it was $ 110,000 for a joint applicant, now it's close to $ 400,000 for a joint applicant, so more people can take the deduction of the child tax credit.
Deduction of mortgage interest
As of 2017, you were allowed to take the mortgage interest deduction if your loan was $ 1,000,000 or less, in 2018, it will be only $ 750,000. This new law will only be applicable for people who obtain their new mortgages in 2018, if you already have the previous mortgage of 2018, it will not have any impact for you.
Loans with mortgage and lines of credit
In 2018, interest on home equity loans and home equity lines will no longer be deductible, even if you already have them, so you can no longer take the interest deduction.
Reassess what your options are: Stay with your home equity loan? Should you combine with your first loan? It is important to evaluate your situation.
529 Plans
In 2017, the 529 plans were only for qualified higher education expenses, now they can be used for qualified expenses from grade K through 12. Although you can now use these funds ahead of time to cover your child's education expenses, the The best option could be not to use it for this purpose because the money has not had enough time to grow in this deferred tax account. It is better to leave it there to be acomule and grow.
Property taxes
In 2018, you will not have to pay federal property taxes unless you have a property of more than 11.2 thousand if you are single or if you are married, of 22.4 thousand. Fewer people will have property taxes as a result of this new tax law.
Kiddie Tax
As of 2018, children under the age of 24 who have income not derived from work will pay the same rate as the trust.
Corporate tax rate
The federal corporate income rate will go down from 35% to 21%.
Small companies
Small businesses that are often referred to as "pass-through", sole proprietor, partnership, LLC, S-corps will receive a deduction of 20% of their income. This could be a significant tax cut for them.
Alimony
As of 2019, alimony will not be tax deductible and the recipient will no longer have to pay taxes on the money he receives.
Flexible spending accounts
FSA is a way to withdraw pretax funds for qualified medical expenses. The contribution limit increased from $ 2,600 to $ 2,650 in 2018. These funds could be used for medical expenses not covered by your health insurance, such as co-payments, deductibles, dental and vision care. You have to spend it before the end of the year. Use it or lose it!
Health savings account
An HSA account is for people who have a high-deductible health insurance plan. Families can save $ 6,900 in 2018 on this account, compared to $ 6,750 in 2017. Contributions are 100% tax deductible. The money you enter into these accounts is not subject to taxes, the money you take out is not subject to taxes as long as you use it for qualified expenses and the possible investment gains with this money are not taxed either.
There you have friends, these are some of the most relevant changes in the tax laws that will affect us, the best of luck in 2018 to administer your taxes! Always look for advice for your particular fiscal situation, knowledge is power.
Thanks to Ric Edelman for helping us understand these new changes in tax legislation.