Many people are
seeing decreased refunds or finding that they owe taxes to the IRS because of
recent tax law changes. Since many states follow the federal determination of
income and deductions, your state taxes will likely change too.
The impact of the
changes being seen in 2018 federal income taxes, as a result of the Tax Cuts
and Jobs Act of 2017, is likely going to vary depending on each individual
taxpayer's circumstance and their prior reliance of familiar aspects of the tax
code that have seen significant change.
The increase in the
Standard Deduction and the elimination of the Personal Exemptions are likely to
cause the greatest changes for most taxpayers.
For 2018, the
increased Standard Deduction amounts for all filers are:
- Single or Married filing
separately—$12,000.
- Married filing jointly or
Qualifying widow(er)—$24,000.
- Head of household—$18,000.
Please be aware that
this increase in the Standard Deduction is accompanied by the suspension, for
tax years from 2018 to 2025, of the Personal Exemption, which in 2017 was
$4,050 for the taxpayer, spouse, and each dependent.
For taxpayers who
have previously itemized their deductions, it is likely that itemizing will be
less attractive, due to the following, and other, changes:
- State, local, property, and
sales tax (SALT) deduction – capped at $10,000 ($5,000 if married filing
separately).
- Mortgage interest – capped at
interest on $750,000 of mortgage debt.
- Home equity loan or line of
credit -- interest is deductible only if loan was used to buy, build, or
substantially improve your home and your total mortgage debt doesn’t
exceed $750,000.
- Miscellaneous deductions
subject to the 2% limit – suspended.
- Personal casualty and theft
losses – suspended (with exceptions).
