Are you ready for the Biggest Tax Change in a quarter of Century??
While it is not a complete overhaul of the American tax system, the new tax law comes close! Every area of life that is impacted by taxes was touched in some way or another by the new tax law. Fortunately, the rates for everyone will be lower, but those lower rates came at a cost.
Many of the highly favored deductions have even eliminated or reduced. Almost all miscellaneous itemized deductions subject to the 2% AGI limitation have been eliminated. These include such items as unreimbursed employee expenses, investment and tax preparation fees, job search related expenses, and many more. This elimination means that preparation and planning have become necessary to minimize the impact if you are used to taking these deductions.
Another big change in the law is the limitation on SALT (State and Local Income Taxes) deductions. This includes real estate taxes, state income taxes and personal property taxes (like that pesky tax you pay when you buy a car). This deduction is limited to $10,000 which sounds like a lot, but if you have a big real estate bill and your family makes over $100,000, you can easily exceed this amount.
Everything we have previously done as far as dependents is different, too! The new, much higher standard deduction eliminated the dependent exemption which was always a valuable tax savings an often an argument between divorced spouses. Now that item is gone and replaced by a dependency credit. All these changes mean taxes will be very different when filing in early 2019.
If any of this worries you I have two resources for you:
Here is a link to a more comprehensive outline of the tax law changes “10 Things You Need to Know about the Tax Law”
And I am opening my calendar for tax planning appointments. Schedule an appointment if you think you may need to review your current situation to make sure you don’t pay too much tax for 2018.