ROCK HILL, S.C. (WBTV) - There are several changes that will go into effect during the 2018 tax filing season, since President Trump signed the tax reform bill last week.
Accountants at Moore & Moore CPA in Rock Hill say there will be winners and losers in the tax overhaul, but in general it should mean more take home pay for individuals. While you likely won't notice the changes until you file for 2018 so not this upcoming tax season, there are some changes you may notice right away.
One of the biggest changes in 2018 is the standard deductions nearly doubling. Under the current laws, the standard deduction for an individual filing is $6,350, but in 2018 that will nearly double to $12,000. For married couples filing jointly, the standard deduction will jump from $12,700 to $24,000.
"Some people who itemized in the past, will use the standard deduction because it increased so much," Vice President of Moore & Moore CPA Heath Gorby said.
People who itemized before typically have more circumstances to account for when filing their taxes and could get a bigger deduction than the standard deduction. However, with the standard deduction nearly doubling, many people won't get a bigger deduction by itemizing, so they can use the standard deduction and have a simpler filing process.
If the standard deduction is still less than the amount of your itemized deduction, you can still choose to itemize. However, there are some changes to itemized amounts.
For example, under current law you can account for up to $100,000 of home equity loans, but under the new tax reform bill you cannot account for home equity loans in your itemized deduction at all. The only mortgage loan you can itemize, is your acquisition loan, and now there is a cap of $750,000.
"So if you bought a home for $750,000, only that $750,000 portion will you be able to deduct in interest," Gorby said.
There is also a $10,000 cap for interest off of state and local taxes, like property taxes. Accountants advise you to pay your state and local taxes before the New Year, so if you paid more than $10,000 in state and local taxes, the cap will not impact you in the 2018 filing season.
There are also changes to the federal tax brackets. The income levels in each bracket change, so you could fall into a lower bracket. The rate of some brackets have also been lowered, by two to four percent. Because of the bracket change, accountants say if you can wait to get an end of year bonus until 2018, do so, because you could get less taxes taken out if you fall into a lower bracket in the New Year.
Under current tax code, charitable donations can count as a deduction, and still can under the new law, if you itemize. However, Gorby says charitable donations cannot be written off if you choose the standard deduction.
Another change in the tax code will effect season ticket holders. Gorby says under current law, if you bought season tickets 80 percent could be written off for charitable donations, but that will go away come 2018.
The federal healthcare exchange is still intact, despite multiple attempts to repeal it. However, under the new tax reform, the penalty for not having health insurance will go away starting in 2019. Those without health insurance and who were paying hundreds of dollars in penalties will not have to worry about that being taken from their tax returns in 2019.
Child tax credits have also doubled from the tax overhaul. Currently, a person would get roughly a $1,000 credit per child. Now, a family will get about $2,000 in tax credits per child depending on their income level. A tax credit is different than a deduction or adjustment, because it can also be refunded. So if a family owes $8,000 at the end of the year, but has one child, they will only have to pay $6,000 instead.
"Of that $2,000, $1,400 is refundable so if you don't owe taxes at the end of the year, you can still get $1,400 back even if you didn't pay anything," Gorby said.
Under adjustments, the new law no longer recognizes relocation expenses or alimony, however different rules apply to the military. Despite concern of student loan interest adjustments going away, that survived the tax reform.