What To Know About Taxes In 2018

What To Know About Taxes In 2018

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The Tax Reform Act was passed at the end of 2017, so this year is the first it really starts impacting people. There are certain advantages, but also possible disadvantages that can come with this legislation.

The Tax Reform Act has largely been viewed as the biggest piece of legislative tax reform in the past 30 years, and there’s hardly a group of businesses or taxpayers it doesn’t affect in some way.

The following are some key takeaways to keep in mind this year.

Real Estate Investors

One group especially affected by tax changes are real estate investors. Just one example of these changes is the increased depreciation deduction now available.

Landlords and residential rental property owners are now able to deduct the cost of personal property that they use in rental units.

This can include things like furniture and appliances.

There’s also the ability to get up to 100% bonus depreciation, which is phased down annually until 2026. This includes on new and used business-use personal property.

Tax Brackets

All federal taxes are calculated by looking at filing status tax brackets, and every year the brackets are adjusted accordingly for inflation. All of the tax brackets have gone up from 2017. For example, for married filing separately it went from $235,350 in 2017 to $240,025 for 2018.

What this means is that you can earn slightly more than you did in 2017 and still stay in the 15 percent tax bracket.

Standard Deduction Increase

One of the tax changes that people are probably most happy about is the increased standard deduction. The tax code allows people to subject a standard deduction from their adjusted gross income, or they can go with itemized deduction.

If you do better with the itemized deductions, then you can go with that and file a Schedule A return.

If you’re going with standard deductions, it’s gone up to $12,000 for individuals, $18,000 for heads of household, and $24,000 for married couples who file jointly as well as surviving spouses. There are no personal exemption amounts for 2018.

Other Tax Credits and Deductions

Along with increasing the standard deduction, there are some other changes regarding credits and deductions.

For example, the child tax credit went to $2,000 per qualifying child. It’s refundable up to $1,400, in phaseouts.

For 2018, the maximum Earned Income Tax Credit amount is $6,431 for taxpayers who file jointly and have three or more children who qualify. Income phaseouts also qualify here.

For 2018, taxpayers can deduct a maximum amount of $2,500 from student loan interest.

State and Local Taxes

Finally, there was a lot of conversation about how the new tax legislation would affect state and local taxes. Deductions for state and local sales, property taxes, and income taxes are limited, but still in place.

The amount you can claim for all of these things can’t exceed $10,000, and foreign real property taxes can’t be deducted under this specific exception.

The home mortgage interest deduction has also been changed, and for mortgages taken out before December 15, 2017, the limit is $1 million.