Tax Season has Started! IRS E-filing starts Jan. 28, 2019

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Hello All,

I must admit that I am concerned about how the president’s Tax cuts and Jobs Act will affect each of us.  there are “pros & cons” to the changes to many of the deductions we are used to.  My biggest concern has to do with these 10 key changes for Individuals:

1.  Standard Deduction Increase

  • One of the biggest impacts taxpayers can expect involves an increase in the amount of the standard deduction. The previous amount — $6,350 for single filers — is nearly doubled under the reform, now falling at $12,000. Couples who file jointly will find that their standard deduction has risen from $12,700 to a substantially heftier $24,000.
    • This change will be of particular benefit for those who do not itemize deductions.  For those who do Itemize, you may not need to if you do not have enough deductions to equal the new/higher standard deduction.  This could be a time and record saving improvment to preparing your tax returns.

2.  Personal Exemptions – ELIMINATED!

  • In previous years, you were allowed a deduction for each person in your household.  That income deduction for 2017 was $4,050 per person.  for 2018, you no longer get this deduction.
    • If you were a household of 4, your previous income deduction was $16,320, but for 2018 it is nothing.  Now, you need to factor in the huge increase in the standard deduction.  For a family of 4, the standard deduction is increased $11,300, so you are losing $5,020 in deductions in 2018.
    • The lower tax rates may adjust for this change.  I hope so.

3.  Child Tax Credit

  • The Child Tax Credit has been doubled – from $1,000 per child to $2,000 per child.  This is really good!
    • Since the Child Tax Credit is a direct credit to the taxes owed, this will really help that family of 4.

4.  State & Local Taxes – Capped!

  • When you itemize deductions, you have previously deducted all the taxes you paid to state and local agencies.  the most common are State Taxes paid to Oregon and your Real Estate taxes for your home.
    • This could hurt if you work in Oregon and own a home, because the total deduction is now limited to $10,000.

5.  Affordable Care Act Mandate Penalty – Repealed!

  • You will no longer be penalized for not having health insurance.  This is good for those of you who make too much to get a good break on healthcare through the Marketplace, but can’t afford the insurance.  Phew!

6.  Mortgage Interest Deduction – Maximum you can claim has dropped

  • Not many of us will need to worry about this one.  Individuals who purchased a home in 2018 can deduct mortgage interest up to $750,000 of acquisition indebtedness (previously $1 million). The interest deduction on home-equity loans was eliminated.

7.  Tax Brackets – Adjusted

  • Adjustments to the tax brackets included lowering a number of the tax rates and slightly widening the income thresholds.

8.  Retirement Fund Contributions – Increased

  • Employees can now contribute up to $18,500 to their 401(k), 403(b), most 457 plans and Thrift Savings plans.  this is a $500 increase from 2017

9.  Roth IRA Contributions Income Phaseout Limits – Raised

  • The income “phase out” fr single individuals and heads of household raised to $135,000 from $120,000.  The phaseout for married couples increased to $199,000, from $139,000.
    • A “phase out” is when your deduction is reduced once you hit these limits.

10:  Qualified Business Income Deduction – Introduced

  • Taxpayers who own a sole proprietorship, LLC, rental properties, S corporations and partnerships can generally deduct 20% of their qualified business income.
    • At this time, I am not sure if this deduction is also recognized for “self employment tax” (social security)

I hope this information helps you to understand some of the major changes made.  It will be a very interesting season to see how you benefit from this change.

Best regards, and see you all soon!

Bonnie

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Tax Update for 2017 Tax Returns

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Curious about the new 2018 tax law voted in at the end of 2017?

As new information comes in, I will be blogging so you will be able to stay informed. Currently the IRS and the Dept. of Treasury are staying silent, but I am hearing some tax consultants are trying to get ahead of the game by trying to interpret available information on the tax bill.  Be weary about this.

Now that the bill has moved to the IRS and Dept. of Treasury, they are busy trying to write the tax code, fill in gaping holes and getting things in order before broadcasting the new law to everyone. They estimate it will be 6-8 months before we know specifics. In the meantime, I will blog about the changes I feel comfortable sharing.

ITINS (Individual Tax Identification Numbers)

For those of you with a ITIN card, be aware if your middle 2 digits are 70, 71, 72 or 80, your card has expired as of Dec. 31, 2017.  You will not be able to file your tax return UNTIL your card renewed.

2017 Tax Return Dates and Important information:

·         Federal Electronic tax return filing starts January 29, 2018

·         Federal Filing deadline: April 17, 2018 (due to the 15th falling on the weekend and Emancipation Day)

·         Oregon State filing deadline: April 17, 2018 (same as Federal)

Earned Income Credit/Refunds and Additional Child Tax Credit

If your 2017 income tax return shows a refund due you, and you have claimed the earned income credit and/or the child tax credit, your refund will be delayed until February 27, 2018.  This is to allow time for IRS to uncover fraudulent tax returns and help battle identity theft

Expired Deductions and Provisions as of December 31, 2016

·         Tuition and fees deduction for your college loans has expired (however AOTC and the Lifetime Learning Credit are still available)

·         Mortgage Insurance premiums deducting as mortgage interest has expired

·         Medical expenses claimed by persons 65 and older, now can only deduct those expenses exceeding 10% of their adjusted gross income

 

There are several small changes, like a small increase to the standard deduction, and personal exemptions, but other than that, tax es are pretty much as they were last year.

Feel free to contact me if you have any specific questions about what’s happening with your 2017 taxes this year, and I’ll blog more about the new tax law that went into effect Jan. 1, 2018.