Don’t Let Tax Reform Changes Surprise You. Plan Now!
STEPHEN SMALENBERGER, EA®
Tax Reform changes have been in the news lately. You’ve probably heard or read about it. Let’s discuss how these changes impact you. Understanding how things have changed will allow you to talk with your accountant now as they’re preparing your 2017 return, to make any changes for how your 2018 return will be different. There may be some things you can change now with a majority of the 2018 year remaining that can affect your 2018 return in a positive way.
1. The number of tax brackets haven’t changed, there are still seven brackets. The difference is the tax owed in each bracket. Even though there have been decreases in rates, some of the brackets have increased so there is now more income included in a higher bracket, for example.
- The State and Local Taxes (S.A.L.T.) deduction has changed. You used to be able to deduct real estate taxes for multiple properties, but now this deduction is limited to $10,000. So if you have multiple properties you may not be able to deduct the S.A.L.T. amounts you could before.
- Itemized and Standard Deduction amounts have changed. The standard deduction amount has changed to $12,000 for an individual electing single filing status and $24,000 for a couple electing married filing jointly status. Some of the itemized deductions have changed so fewer people may potentially be taking the standard deduction amount rather than itemizing deductions. However, if you are charitably inclined you may still be itemizing your deductions.
- The Personal Exemption has been eliminated that you used to receive for each dependent. This is important if you have several kids or an aging family member that you are supporting as these are no longer able to decrease your taxable income.
- The Roth Conversion Recharacterization is no longer available. We’ve done prior videos on this and when it was applicable, but this is no longer allowed with the tax reform changes.
The point of this post is to make sure you are having the conversation now as to what changes to make for the outcome of how it will affect you when you file your 2018 tax return. Planning now can make a big difference for changes you may not have been aware of.