Big tax changes arrived in 2018 courtesy of the Tax Cuts and Jobs Act (TCJA) of 2017. When you go to file your 2018 tax return in 2019, you may be surprised at just how much has changed since you last filed. At HighPoint Advisors, LLC, we want to make sure the only big surprise you get when filing your taxes is how much you’re able to save. Below, we outline some of the biggest tax reform changes that will affect your 2018 taxes.
In 2018, the standard deduction increased from $6,350 to $12,000 for single taxpayers, $13,000 to $24,000 for married couples and $9,550 to $18,000 for head of household filers. In turn, this major increase will likely save taxpayers both time and money. However, with an increase in the standard deduction came a reduction in other deductions – meaning the majority of people will no longer benefit from itemizing their deductions.
Personal Exemption and Child Tax Credit
In 2018, we said goodbye to the personal exemption, which once allowed taxpayers to subtract $4,050 from their taxable income for each dependent. On the flipside, the child tax credit was raised to $2,000 from $1,000 for each child age 16 years or younger. For dependants that don’t qualify for the child tax credit, a separate $500 credit is available.
Effective January 1, 2019, individuals going through a divorce will no longer be able deduct alimony payments from their taxes. However, divorces and separation agreements signed before 2019 will be grandfathered into the new law.
Other Itemized Deductions
For the 2018 tax year, taxpayers will no longer be able to claim a number of deductions, including, but not limited to:
- Moving expenses
- Job expenses
- Tax preparation fees
- Investment fees
- Credit card convenience fees
- IRA account fees
- Unreimbursed employee expenses
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.