By Michael Aston, E.A.
Alhambra Tax Center
On December 22, 2017, the President signed the new tax law.
Most of the changes won’t come into effect until you file your year 2018 income tax return. So you can postpone the Trump worry-ism until next year.
For the year 2017, the Schedule-A Medical Expense deduction threshold is changing from 10.0% to 7.5%. What this means is … if your AGI is $100,000 the amount of medical expense(s) you cannot claim drops from $10,000 to $7,500.
Below are a few changes that will affect most of the readers:
· Tax Rates – currently at 10% - 39.6% … year 2018 will drop to 10% - 37%.
· Standard Deduction – currently at Single $6,350, Married Filing Joint (MFJ) $12,700, and Head of Household (HOH) $9,350 ... year 2018 will be Single $12,000, MFJ $24,000 and HOH $18,000.
· Personal Exemption – currently at $4,050 for yourself, spouse and each dependent … eliminated in 2018.
· Home Mortgage Interest – current mortgage principal limitation is at $1,000,000 or less … will be dropped to $750,000 or less.
· Tax Paid (Schedule-A) – currently can claim state sales tax or income tax, property tax, investment property tax, and DMV with no limitation (can claim in excess of $10,000) … year 2018 will have a limitation of $10,000 as a maximum deduction combined.
· Charitable deductions – currently limited to 50% of your total income … will increase the limit to 60%.
· Casualty Loss (personal) – currently allowed … but will be eliminated in year 2018 unless you are in a Federally Declared Disaster Area.
· Miscellaneous Itemized Deductions Subject to the 2% of AGI Limitation – this is the fun area where we claimed the ‘knick-knacks’ to lower our taxes. Such as Tax Preparation Fees, Home Office (Office in the Home), Union Dues, Uniforms, business mileage, unreimbursed business expenses, and many more creative items. This will be eliminated in the year 2018.
· Penalty for not Having Health Insurance – will be eliminated in year 2019.
· Child Tax Credit – currently $1,000 … 2018 will increase to $2,000
· Family Tax Credit – currently not available … new credit for 2018, $500 per dependent that does not qualify for the Child Tax Credit.
All of the changes are scheduled to expire in 2025. Unless renewed or changed they will revert back to 2017 laws in 2026. If you would like to see a full list of tax changes, go to www.irs.gov or consult a tax professional.