With a new President in the White House and a new year ahead of us, it is important to keep up-to-date on the laws for taxes to ensure that you do not run into trouble with the IRS or miss out on saving yourself some money. As of 2018, there have been changes to the income tax brackets, deduction values, and more so our Coral Springs accountant group has laid out a guideline below to help you understand the changes and how they affect you.
Changes to the Tax Brackets
Perhaps the most important and applicable of the changes are the changes to the tax bracket you fall into based on your income. For most of the brackets, the tax rate has been lowered while the range of incomes they encompass has shrunk slightly.
For example, before the changes a single income of $38,700 – $93,700 would have paid a 25% tax rate. As of 2018, a single income between $38,700 and $82,500 would pay only 22% – a 3% difference with an $11,200 range difference. However, even if you exceeded the upper $82,500 limit for 2018 with a $90,000 income, the next bracket would still only require you to pay 24% as opposed to previously costing you 25%, meaning that you will still pay less in tax.
Additionally, the income ranges for those who are married and file jointly have been changed to align better with the new income ranges for single filers. With the new changes, the ranges are now exactly double those of the single filers for all but those who earn a combined $400,000 or more a year. This helps to take some of the confusion out of deciding how to file, and simplifies the filing process overall.
Deductions, Exemptions, and Tax Breaks
Another significant change for 2018 comes in the form of the removal of personal exemptions in favor of a larger standard deduction. The standard deduction is the maximum amount you can deduct from your income without providing an itemized deduction list, while a personal exemption allows you to deduct more than the standard deduction, permitting you have the expenses to deduct. This benefits the majority of Americans, as it is believed that only about 30% of taxpayers benefit from itemizing. However, be sure to consult with tax preparation services in Coral Springs to find out which option is right for you.
The changes are as follows:
Educational tax break rules have remained relatively unchanged, with the primary change involving 529 accounts. The tax-exemption status placed on funds taken from 529 college savings accounts has been expanded to cover additional educational expenses such as tutoring, private school fees, and more to encourage the use of these accounts.
Parental tax breaks have also been changed, doubling the Child Tax Credit (a credit earned for each qualified child under 17) to $2,000, and increasing the refundable portion of the credit to $1,400. In addition to the increase standard deduction, this allows for parents and families to save more money that they can put towards their children.
Overall, these changes appear to be beneficial to the majority of taxpayers, especially families with children. The tax rates are lowered for lower earners, the deductions available seem to have increased, and the concept of taxes overall seems to be simplified slightly. However, taxes can still be confusing so be sure to talk to a Coral Springs accountant to talk over your financial situation and figure out the best way to save you money. Professional tax preparation services in Coral Springs like our firm Andrews and Company can help take the stress out of tax season and help you avoid the dreaded IRS.
Andrews February 27th, 2018
Posted In: Tax