By Drew Steinman
The arrival of 2019 brings with it the 1099s, W-2s, and other important tax documents that grace us with their presence. These of course serve as friendly reminders that tax season is upon us and that April 15th is coming whether we like it or not. However, these taxes aren’t like taxes of the past. Those filing, both personal and business returns, will find many changes when preparing their 2018 taxes.
One of the largest, and most welcome, changes is that most taxpayers will find themselves in a lower tax bracket for their 2018 taxable income. The chart below demonstrates the tax bracket changes for Married Individuals Filing Joint Returns and Surviving Spouses from 2017, on the left-side of the chart, and 2018, the right side. Most of the 2018 taxable income amounts increase, while many of the tax bracket percentages decrease.
Despite this being very considerable change in the tax law, it is hardly the only change. Another alteration is that the standard deductions have increase significantly. The standard deductions for single taxpayers now stand at
$12,000, up from the previous total of $6,350; the deduction for married individuals filing jointly deductions have increased to $24,000 rather than the previous total of $12,700.
Although the standard deductions have increased, the itemized deductions for state and local taxes (including income, property, and sales tax) are now capped at a total of $10,000. Miscellaneous itemized deductions from tax preparation, work-related expenses, and investment fees have been eliminated. The changes in the itemized deductions, paired with the in-crease in standard deductions, means that most taxpayers will no longer itemize their tax returns.
More changes coming to your 2018 taxes include the elimination of personal exemptions. The $4,050 that could have been exempt previously, has been retired, however, the Child Tax Credit has increased from $1,000 to $2,000 per eligible child.
Finally, one modification that business owners (Sole Proprietorships, S-Corporations, and Partnerships) will find during their tax preparations is a 20% deduction on business income. This is a welcomed sight, but also based on eligibility and subject to certain limitations, including a phase-out for certain businesses with more than $315,000 in taxable income and more than $157,500 for single filers.
Keep in mind that this is certainly not a comprehensive list of all the changes regarding your 2018 taxes, but some important ones that will affect most people filing. Be sure to consult your tax preparer for more information when it comes to the full list of changes in the tax law.
Information presented herein is based upon facts derived from publicly available information, and is also based on certain assumptions, including that there are no additional changes to current tax law, and that demographic information regarding retirement plan contributions also remains unchanged.