So, unless you live under a rock, we are all aware of the tax changes that are impacting us for the 1st time this year.
Because you are all my Savvy Family, I wanted to write a blog post on some of the major changes that I think you should be aware of.
Let me be perfectly clear, this is just the tip of the iceberg, as the saying goes… do NOT think that you can make any tax decisions based on my blog words. You need to speak to your tax professional; (or click here to speak to me) I can be your tax professional if you need one 😊
I would be remiss if I didn’t tell you that the new Tax Reform is in play until 2025. And most of the items that I will discuss below sunset in 2025… that is unless you are a corporation, those changes are permanent.
I also want to say that I think the purpose of these changes was to simplify the whole return process… so keep that in mind as you read through these changes and be sure to tell me your thoughts on whether this in fact does simplify things or not…
The standard deduction is a reduction from the income reported for the tax payer. Typically tax payers were allowed to calculate their actual deductions and compare that amount to their standard deduction and take the bigger of the 2 amounts. So prior to the tax reform the standard deductions were as followed:
Single or Married filing separately: $6,350
Married Filing Joint: $12,700
Head of Household: $9,350
Now the government has raised the standard deduction by approximately 100% – so yes, they doubled the standard deduction so now the deductions are as followed:
Single or Married filing separately: $12,000
Married Filing Joint: $24,000
Head of Household: $18,000
So what does this mean? If you typically in the past claimed the standard deduction then this double down is a big win for you… if not, you would still calculate your actual deductions and compare it to your standard deduction.
Child Tax Credit
So for all my tax payers with children, you might like the next double down that is part of the new tax reform. In the past, the child tax credit was $1000 per child under 17 years old. Now, that has been increased to $2000 per qualifying child. Not all of this new amount is refundable however and there is a max amount of $1400 that can be refundable. Be aware of phase outs for the credit.
ACA Mandate (Obamacare)
First of all I want to say that since everyone called the Affordable Care Act Obamacare, I am dubbing this tax reform #TrumpTaxes. Now that I got that off my chest, the ACA mandate that was in place has been repealed. So you no longer have that penalty imposed if you choose not to be covered with health insurance.
So this is one of my favorite topics to address, and not in a good way. Under the new tax reform, the State and Local Taxes deduction has been capped at $10K for tax payers. Now remember above I mentioned that you could take the standard deduction or you can do itemized deductions, well this is a major itemized deduction that people in high tax states typically take. In the past, you were able to deduct ALL of what you pay for State and Local Taxes, which included property taxes.
With this cap, now a lot of people in high tax states, such as California, New York, New Jersey and Connecticut to name a few, have just been limited to how much they can deduct when it comes to their SALT taxes.
Us coming from a high tax state, this is something that would personally affect us… but we did move right before the new tax laws took effect so we actually reduced our property taxes drastically.
Divorce is obviously a messy topic and it brings out the worst sometimes. Alimony is one of those things that can be seen as good or bad depending on who you ask. In the past if you were paying alimony, you could deduct it and if you received alimony, you would report it as income… so I guess you can see who would like this new change better???
Don’t forget to connect with me on social media at
Instagram – @TheSavvyAccountant
Facebook – @The Savvy Accountant
Twitter – @AccountantSavvy
Subscribe to our newsletter for tips to help with your taxes. Click here to join