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2018 Tax Law Changes For Individuals

The new Tax Act reduces tax rates for individuals and corporations, repeals exemptions, eliminates many deductions, and increases the Standard Deduction to a level which eliminates Itemized deductions for most taxpayers.

 Most of the individual changes will expire at the end of 2025, meaning the old tax code rates and deductions will return in 2026 unless Congress passes another law before then.

Taxpayers are required to provide the Social Security Number of each dependent to receive the refundable portion of the child tax credit.

Following are the most notable changes taking effect after December 31, 2017

Tax Rates:  10%, 12%, 22%, 24%, 32%, 35% and 37%. 

Personal Exemptions:  The personal exemption is repealed.

Standard Deduction:  Single taxpayers and married taxpayers who file separate returns can claim a $12,000 standard deduction. Married couples filing jointly can claim $24,000, and taxpayers filing as "head of household" (single individuals with dependents) can claim a standard deduction of $18,000

Affordable Care Act:  The requirement to maintain Minimum Affordable Coverage is suspended after 2018

Alimony:  For divorces after 2018 alimony payments to a former spouse are neither taxable to the recipient spouse nor deductible by the payer spouse

Casualty Losses: Deductions for unexpected losses to personal property are no longer deductible unless covered by specific Presidentially Declared Federal Disaster Declarations

Child tax Credit:  The child tax credit will increase to $2,000 per qualifying child and will be refundable up to $1,400, subject to phase out limitations.

Taxpayers are required to provide the Social Security Number of each dependent to receive the refundable portion of the child tax credit.

Additionally, a new $500 nonrefundable credit for other qualifying dependents who are not qualifying children has been enacted. Phase outs which are not indexed for inflation, will begin with adjusted gross income of more than $400,000 for married taxpayers filing jointly and more than $200,000 for all other taxpayers

College Credits: The American Opportunity credit and the Lifetime Learning Credit remain unchanged.

Individual retirement Accounts: Roth IRA Conversions may no longer be recharacterized. Other types of IRA recharacterization are unaffected. A contribution to a Roth IRA may be recharacterized to a Traditional IRA before the due date of the tax return but a conversion to a Roth IRA may not be reversed.

Moving Expense Reimbursements Moving expense reimbursements are no longer excludable from Wages or Gross Income with Military exemption 

Mortgage Interest:  Home Mortgage Interest is capped at $750,000 of Acquisition Indebtedness. The current Home Mortgage Interest Deduction to the extent of $1,000,000 of Mortgage Interest is Grandfathered.  Home Equity Mortgage Interest is no longer deductible Deductions are capped at $10,000 for State, Local, Real Estate, Personal property  Taxes, and Sales Taxes

These are the few importance changes may affect most of you and there are so many more changes from last year to this year and we will make sure you will get the maximum advantage from the new tax law changes during the tax preparation

One most important thing:  If any one is eligible for Social Security for their dependent please apply asap. Taxpayers are required to provide the Social Security Number of each dependent to receive the refundable portion of the child tax credit. ITIN is not eligible for child tax credit.

 

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