As you file your taxes this year, you’re probably hoping for a refund from the IRS. And to maximize your tax refund, it is important to understand the most recent tax changes that have gone into effect. The impact of the tax reform, whether it be positive or negative, depends on each consumer’s situation. To help, ACCC explains what consumers need to know about the latest tax reform.
New Tax Reform for 2018 Filings
Here are 7 points to note from the new tax reform:
- New tax brackets. The tax brackets for 2018 were updated with lower top marginal tax rates, the percentage of income paid on taxes, and updated income levels. The new brackets are 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. Check your tax return to see what bracket you fall into.
- Tax deductions. The standard tax deduction has increased from $6,350 to $12,000 for single taxpayers, from $12,700 to $24,000 for married filing jointly and $9,350 to $18,000 for the head of household.
- Personal exemptions. Personal exemptions have been eliminated. Originally the exemption allowed each family to subtract $4,050 for each child or dependent.
- State and Local Taxes (SALT). With the new tax reform, SALT deductions are limited to $10,000. Before, there was no limit on SALT deductions. This change affects those who itemize their deductions.
- Child/dependent tax. The tax reform changes increase the child/dependent tax from $1,000 to $2,000 per child, with $1,400 being refundable.
- Mortgage interest tax deduction. The tax reform restricts how much mortgage interest can be deducted, decreasing from $1 million to $750,000 for married couples and to $375,000 for married couples filing separately.
- Charitable donations. With charitable donations, the tax reform increased the deduction from 50 percent to 60 percent of income for those who itemize their deductions.
If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today.