2018 Tax Law Changes
This year, unless you are in the top 1% of income earners, you may pay MORE in taxes than you have ever paid before, due to the new Tax Cuts and Jobs Act (TCJA). Individual tax cuts are insignificant and complicated. For example, some of the repercussions are as follows.
• Residential Mortgage Interest Deduction: Under the TCJA, the deduction for interest on home equity loans is suspended, except in cases where the equity loan proceeds are used to acquire or substantially improve a first or second home. Furthermore, the interest on indebtedness to acquire a qualified residence is limited to $750,000 for joint filers. (This limit does not apply to mortgages, acquired before December 15, 2017, which are subject to a $1,000,000 debt limit.)
• Personal Exemptions: The TCJA reduces the personal exemption to zero. Thus, taxpayers can no longer claim personal or dependency exemptions and large families, in particular, will lose an important tool for lowering their taxable income.
• Miscellaneous Deductions for items, such as employee business expenses, tax preparation fees, and investment interest expenses are gone or modified.
• State and Local Tax Deductions: Under the TCJA, taxpayers can no longer deduct the full amount of state taxes, local taxes (i.e., property taxes) and sales taxes. These deductions are limited to a total of $10,000 in the aggregate.
• Kiddie Tax Modifications: In general, under prior law, the unearned income of children were taxed at the parents’ tax rates, if their rates were higher than the child’s. However, under the TCJA, the child’s unearned income is taxed at the rate applicable to trusts and estates, which are generally higher than individual rates and kick in sooner than the previous law.
As your Tax Preparer, I will continue to reduce your tax liability and increase your tax refund, as much as I legally can. However, given the huge change in the laws and everyone’s unique tax situation, I must carefully review your situation to reduce your tax liability as much as possible – for this and future years. Call my office and set up an appointment!