Changes Impacting Tax Year 2018

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Courtesy of our strategic partners Joseph & Joseph, CPAs

It’s that time of year again! As we prepare for the 2019 tax season, we wanted to share some items that may impact your tax situation going into this tax season.

As you likely heard on the news, at the end of 2017 Congress passed a major tax bill called the TCJA (Tax Cuts and Jobs Act). The bill was a major overhaul of the tax laws that will impact the 2018 tax year and beyond.

We want to outline some of these changes that may impact you the most and how you should consider responding. There is still time to plan ahead and avoid a surprise in April.

 

New Standard Deduction and Schedule A changes mean fewer taxpayers will benefit from itemizing in 2018.

The new standard deductions are $12,000 for single and married filing separately, $24,000 for married filing jointly, and $18,000 for head-of-household. This is nearly twice the amount of previous standard deductions.

In addition, some significant deductions on Schedule A have been removed or limited, including unreimbursed employee expenses, mortgage insurance, home equity interest, and limit of $10,000 of deduction for all state, local and real estate taxes paid.

Many taxpayers will find these new standards mean they do not have enough deductions to itemize on Schedule A, and will no longer get a tax benefit for these expenses. For this tax year, we encourage you to continue to include your itemized deductions with your tax documents.

Your Federal tax withholding LIKELY decreased in 2018, and could cause you to owe money with your return.

You may have noticed a decrease in Federal withholding on your paystubs. This was caused by the release of updated IRS Withholding Tables in early 2018.

The IRS has indicated that these new tables are designed to have taxpayers break even ($0 owed, $0 refund) with consideration for the new tax law. Since everyone’s situation is different and the IRS calculations are not exact, we see a great likelihood that individuals could be under-withheld, and could owe with their return in April even though they normally expect a refund.

Moving Expenses and Employer Reimbursements

Except for military moves with specific circumstances, all moving expense deductions have been repealed starting in 2018. Employer reimbursements for moves will now be treated as taxable income to the employee.

These are just a few of the changes that may impact your tax situation in 2018.