10 BIG Changes for Your 2018 Taxes
Now that it’s February, most of us will begin thinking about preparing our 2018 tax returns. 2018 marked the start of the broadest tax code revision in a generation. Passed in 2017, the Tax Cuts and Jobs Act ushered in changes to almost every aspect of the tax code. In fact, you would need to go back to the era of Ronald Reagan to find a more extensive revision. The following are ten of the biggest changes for 2018 that individual taxpayers should pay attention to as they complete their tax returns:
- More of your income will fall into lower tax brackets. There are still seven brackets, but several are wider and the rates are generally lower. That means lower taxes for the same amount of income.
- The standard deduction is now $12,000 for single filers and $24,000 for couples filing jointly. That is almost double the 2017 amount.
- You may no longer claim personal exemptions. (The exemption was $4,500 in 2017)
- The deduction for state and local taxes, including property taxes, is limited to a total of $10,000.
- You may only deduct mortgage interest on up to $750,000 of acquisition debt.
- Interest on your home equity loan is no longer deductible.
- The amount you can deduct for medical expenses is lower. If you itemized deductions in 2017, you could deduct medical expenses exceeding 7.5% of your AGI. In 2018, many taxpayers will no longer itemize, and for those who do, only medical expenses exceeding 10% of AGI will be deductible.
- Child Tax credits have doubled. For kids under age 17, the credit is now $2,000.
- The Estate Tax Exclusion has doubled. In 2018, it is $11.2 million per person.
- The Alternative Minimum Tax will no longer affect most people. Thresholds for the AMT have greatly increased, and it will no longer apply in most cases.
The impact of these and other changes will vary based on your circumstances. For example, the number of Americans itemizing deductions should decline -- from 33% to only about 10%. This may change many people’s strategy for charitable giving. New limits on mortgage interest and state/local tax deductions may impact where people live and where they plan to retire. And finally, new tax brackets or tax rates may create new opportunities for retirement or other financial planning. For more details on the new tax laws, contact a Steward advisor, your tax professional or check out our recent webinar, Taking Advantage of The New Tax Laws for 2018 (www.stewardadvisors.com/video-library).