31 Jul How the Tax Cuts and Jobs Act affects you
The Tax Cuts and Jobs Act of 2017 was the biggest tax overhaul in two decades and its impacts on individual taxpayers are wide-ranging. Here’s how the Tax Reform bill will affect your credits and deductions.
Child tax credits
The Tax Reform increased the maximum credit and the income threshold at which the credit begins to phase out has increased.
Before you file your 2018 taxes, remember that each child must have a Social Security number to be claimed as a qualifying child for the child tax credit or additional child tax credit.
The reforms also created a new credit of up to $500 may be available for each dependent who does not qualify for the child tax credit.
The biggest change to taxes as we know them was an increase to the standard deduction. For 2018, the standard deduction amount has been increased for all filers, and the amounts are as follows.
- Single or Married Filing Separately—$12,000.
- Married Filing Jointly or Qualifying Widow(er)—$24,000.
- Head of Household—$18,000.
To help balance the impact on the national budget, the reforms eliminated the Personal Exemption Deduction and suspended, limited or eliminated itemized deductions.
Personal exemption deductions for yourself, your spouse, or your dependents have been eliminated beginning after Dec. 31, 2017, and before Jan. 1, 2026. In 2017, the personal exemption amount was $4,050.
The changes to what can and can’t be claimed in itemized deductions are possibly the second biggest change after the increase to the standard deduction.
The deduction for personal casualty and theft losses was suspended (unless incurred in federally-declared disaster area). The deduction for moving expenses has been suspended for most taxpayers for tax years beginning after Dec. 31, 2017, through Jan. 1, 2026.
Limitations were added to the deduction for state and local taxes and the deduction for home mortgage interest in certain cases.
Eliminating most miscellaneous itemized deductions such as:
- Deductions for employee business expenses
- Tax preparation fees
- Investment expenses, including investment management fees
- Employment-related educational expenses
- Job search expenses
- Hobby losses
- Safe deposit box fees
- Investment expenses from pass-through entities