New Tax Law
Its that time of year again, and this year, I wanted to inform you of the new tax laws starting in 2018, to be filed in 2019. I must admit, at first I was skeptical of the plan and thought it would only benefit the wealthy, which would put the burden on the average person, especially since the the exemptions will be eliminated. A deduction we all counted on. However, once I started to study and test the new plan, I am optimistic that most of us will benefit from the new tax law.
Before I cover the new law, here are some dates to be aware of for this years filling.
IRS has announced that filing season will begin on January 29th and refunds will begin to be sent on February 15th. Those who are receiving earned income and or child care credits refunds will begin on February 27th.
2018 Due dates:
To file your 2017 tax returns you may :
Meet with me in person- Schedule an appointment via website at JLSTAX.com or email at jim@JLSTAX.com or calling 239-404-8692
Send in your paperwork: Send me your documents to address 1921 Trade Center Way Unit 1, Naples Fl 34109
Email in your paperwork: Send me your documents to jim@JLSTAX.com
New Law
With the latest 2017 Tax Reform Legislation there are significant changes that will most likely change your tax liabilities. There will be many of you who will benefit from these changes and will pay less taxes.
This is what you should know:
Congress has passed the largest piece of tax reform legislation in more than three decades. The bill will affect the taxes of most taxpayers, but one key point to keep in mind is that for most people, the bill won't affect your taxes for 2017 (the one you file in 2018).
Lower Tax Rates and Changed Income Ranges
The bill retains the seven tax brackets found in current law, but lowers a number of the tax rates. It also changes the income thresholds at which the rates apply.
• The current brackets are: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%
• The new brackets will be: 10%, 12%, 22%, 24%, 32%, 35% and 37%
The income thresholds at which these brackets kick in have changed, as well.
For married joint filers:
For single filers:
Alternative Minimum Tax Exemptions Increased
The bill also eases the burden of the individual alternative minimum tax (AMT) by raising the income exempted from $84,500 (adjusted for inflation ( to $109,400 married filing jointly and from $54,300 (adjusted for inflation) to $70,300 for single taxpayers, so fewer taxpayers will pay it.
Tax Relief for Individuals and Families
Increased standard deduction:
The new tax law nearly doubles the standard deduction amount. Single taxpayers will see their standard deductions jump from $6,350 for 2017 taxes to $12,000 for 2018 taxes (the ones you file in 2019).
Married couples filing jointly see an increase from $12,700 to $24,000.
Increased Child Tax Credit:
For, families with children the Child Tax Credit is doubled from $1,000 per child to $2,000. In addition, the amount that is refundable grows from $1,100 to $1,400. The bill also adds a new, non-refundable credit of $500 for dependents other than children. Finally, it raises the income threshold at which these benefits phase out from $110,000 for a married couple to $400,000.
Eliminations or Reductions in Deductions
Personal and dependent exemptions:
The bill eliminates the personal and dependent exemptions which are currently $4,050 for 2017 and were expected to increase to $4,150 in 2018.
State and local taxes/Home mortgages:
The bill limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes have generally been fully tax deductible.
The bill also caps the amount of mortgage indebtedness on new home purchases on which interest can be deducted at $750,000 down from $1,000,000 in current law.
Health care:
The bill eliminates the tax penalty for not having health insurance after December 31, 2018. It also temporarily lowers the floor above which out-of-pocket medical expenses can be deducted from the current law floor of 10% to 7.5% for 2017 and 2018
So for 2017 and 2018, you can deduct medical expenses that are more than 7.5% of your adjusted gross income as opposed to the higher 10%.
Self-employed and small businesses:
The bill has a myriad of changes for business. The biggest includes a reduction in the top corporate rate to 21%, a new 20% deduction for incomes from certain type of “pass-through” entities (partnerships, S Corps, sole proprietorships), limits on expensing of interest from borrowing, almost doubling of the amount small businesses can expense from the 2017 Section 179 amount of $510,000 to $1,000,000, and eliminates the corporate alternative minimum tax (AMT).
Based on the new laws I did a comparison of current Law vs the New Law ( See below) As you know the top 1% will greatly benefit from the new tax law however to my surprise In one of my examples below the tax liability was reduced by 43%
Example: 1) Single person who earns $50,000 per year and rents their home or owns home without a mortgage, and does not have health insurance. ( Note this is for federal income tax only. Social Security and Medicare is not included in this example)
Example: 2) Married Couple with three children who earn $100,000, has health insurance for all family members and owns a home with a mortgage. Total Itemized deductions is $30,000
Example: 3) Married Couple with no children who earn $100,000, has health insurance for all family members and owns a home with a mortgage. Total Itemized deductions is $30,000
James L Stockman
239-404-8692
jim@JLSTAX.com
1921 Trade Center Way Unit #1
Naples FL 34109