Tax Code Changes for 2018

Tax Code Changes for 2018

tax code changes for 2018

As businesses and employees across the U.S. begin preparing for their taxes, in preparation for tax season in the Spring, there are some changes to the tax code. These changes affect how you file, and what you pay. How can you stay on top of it all and still maximize your benefits? Let’s take a look at some of the tax code changes for 2018.

Tax Brackets for 2018

The tax brackets have not changed in number; we still have seven. However, the tax percentages have dropped in most brackets, and the qualifying income has shifted. The marriage penalty has not been eliminated, but it is almost gone.

Changes in the Standard Deduction and Personal Exemption

The tax code just got simpler with the new changes in the standard deduction.  With the standard deduction increased, almost by 100% in some cases, computation of taxes owed becomes simplified, since itemized deductions may not add up to the new higher standard deduction.

The personal exemption, which was seen to be valuable for some taxpayers, has been cut.  Hence, some will argue the standard deduction is not really “doubled” if the personal exemption is lost.

Capital Gains Taxes

Most of the changes to capital gains are incidental.  Short-term capital gains are taxed as ordinary income.  So, changes in the tax brackets are carried over to these gains. However, long-term capital gains are more likely to be affected by changes to maximum taxable income levels.

Parents Get Some Breaks

The Child Tax Credit has increased from $1000 to $2000.  The amount of the credit which is refundable is being increased to $1400.  The parameters for qualification are being raised, too, so more families will be able to take advantage of it.

The Child and Dependent Care Credit still allows parents to deduct legitimate child care expenses. The allowance is up to $1050 for one child and $2,100 for two kids.  The children must be under age 13.

It’s also possible to shelter up to $5,000 a year in income to a flexible spending account for child care tax-free. No double dipping though! You can either take the Child Care Credit, or use the Flexible Spending Account, but not both.

529 College Savings Plans can now be used for tuition at lower level education (K-12) in private school or can be applied to tutoring for your child.

Itemized Deductions

Some of the itemized deductions which are still available to taxpayers, with a few changes, are mortgage interest, charitable contributions, and medical expenses.  Unfortunately, many of the previous itemized deductions are going away.

While there is quite a bit of speculation, it just won’t be worth it for taxpayers to itemize anymore with the increase in the standard deduction.  This is another attempt at simplifying the tax code.

Work Related Itemized Deductions

Yet another measure enacted for 2018, is the inability from employees to deduct expenses that they have not been reimbursed for.  If you’ve enjoyed these deductions in the past, your best bet is to make an appeal to your employer and ask for reimbursement.

Affordable Care Act Penalties

While they will be going away in 2019, the Obamacare penalty can still be assessed for 2018.

Estate Tax Exemption

The estate tax has not gone away, but with the threshold raised to $11.18 million for individuals, and $22.4 million for married couples. Although, this won’t affect many taxpayers.

Corporate Tax Rates

In 2017, the corporate tax rate ranged from 15% to 35%, based on profits.  In 2018, it changes to a flat 21%. This change represents a tax cut for corporations and a simplification in the tax code.  The average global corporate tax rate is 25%, so these changes position the US to be more competitive in the worldwide marketplace.

Need Help Sorting It Out?

Most of these changes will work towards simplifying the tax code, and taxpayers have been demanding that for years!  If you need help navigating the ins and outs of filing your taxes for 2018, JStevens Accounting can provide guidance and tax preparation services to maximize your refund potential in 2019.  Call and make an appointment for a year-end review!

Jennifer Stevens

84 squareAs the second generation owner of JStevens Accounting, we are excited to continue our growth year after year. Continuous training and education is a priority as we want to provide the best services to our clients now and far into the future. More About Jen Stevens

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JStevens Accounting, LLC.

410-881-6688
P.O. Box 266
Edgewater, MD 21037