It’s Tax Time!
Tax season is officially here. Whether you’re self-employed, a W-2 employee, single or married, your 2017 return is your last chance (for at least 8 years) to claim certain tax deductions. It’s important to make sure you’re accounting for any applicable deductions in order to lower your tax bill or possibly enhance your refund.
This multi-part blog series will cover five deductions that were either eliminated or changed as a result of the new tax law. Stay tuned to ensure you are claiming the appropriate deductions and know what to expect in the years to come!
Why are the deductions changing?
The new tax law, called the “Tax Cut and Jobs Act” (TCJA), was signed into law on December 22, 2017 and is the largest overhaul of the US tax system since 1986. TCJA made changes to both individual and corporate tax rates, however, the individual provisions in the new legislation expire at the end of 2025. These changes to individual taxes means that your 2017 return is the last time (until 2026) to take advantage of certain deductions.
5 tax deductions that were eliminated or changed
- Personal Exemptions
- State and Local Tax Deductions
- Mortgage Interest Deductions
- Alimony Payments
- Moving Expenses
Prior to TCJA, taxpayers were permitted to claim a personal exemption for themselves, their spouse and for each person they could claim as a dependent.
In 2017, the personal exemption was $4,050 per person. This means a family of four would deduct $16,200 from their taxable income, lowering their tax burden.
Under the new bill, personal exemptions disappear.
How does this affect me?
The new bill increased the standard deduction, which was meant to soften the blow from losing the personal exemption, but it won’t be a better deal for everyone, especially for families with two or more children. In 2017, taxpayers could combine the standard deduction and personal exemptions but starting in 2018 taxpayers will lose those personal exemptions.
In 2017, a family of four making less than $314,000 per year could take $16,200 in personal exemptions and the $13,000 standard deduction (on joint returns). That means $29,000 was deducted from the family’s taxable income. Beginning in 2018, that same family of four will only get the $24,400 standard deduction – a difference of almost $5,000. This gap will only widen for families larger than four people – so make sure to take advantage of the personal exemption when filing your 2017 taxes!
If you’re not sure about if you need to make any changes in your taxes or just need help filing, Polston Tax can help! Our team of tax accountant and preparers will help you navigate the confusing tax law and make sure you take advantage of every deduction. Call us today at 844-841-9857 or click here to schedule a free consultation!