The tax season is almost here, and it comes with some changes courtesy of the Tax Cuts and Jobs Act of 2017 (TCJA). It was signed by President Trump back in December 2017, but there are still some questions regarding its drafting errors.
What are the changes that are most likely to happen with your 2018 Form 1040?
1. Less expensive alternative minimum tax
Unfortunately, the TCJA retained the individual alternative minimum tax (AMT). Fret not
2. New limits on home mortgage interest deductions
Initially, the mortgage debt limit was $1 million, or $500,000 for Married Filing Separately status. Under the new law, the debt limit is $750,000, or $375,000 for Married Filing Separately status. This means that
3. New limits on state and local taxes deductions
Previously, you could claim an itemized deduction for an unlimited amount of personal state and local income, and property taxes. With the TCJA however, your deduction will now be limited to $10,000.
4. Much bigger standard deductions
For 2018, standard deduction amounts are also almost doubled by the TCJA.
5. Lower individual rates
The TCJA also has seven tax rate brackets, much like the law before it. However, the individual rates on incomes below $200,000 are now slightly lower.
6. Increase on child tax credit
Maximum child credit is also doubled, and is now up to $2,000 per qualifying child. Furthermore, up to $1,400 of your credit is refundable.
7. New $500 tax credit for other dependents
A new tax credit of up to $500 is also introduced to new dependents that are not children under 17 years of age.
8. No more deduction for moving expenses
For 2018, any breaks on moving expenses are effectively eliminated, with the exemption of some military personnel. Furthermore, except for some military personnel, employer reimbursements for moving expenses will be taxed as well.
9. New limit on itemized deductions for personal casualty losses
Under the new tax law, personal casualty losses can only be deducted if they are for a federally declared disaster.
10. No more miscellaneous itemized deductions
Last but not the least, so-called miscellaneous itemized deductions that were subject to the 2%-of-AGI threshold are now all eliminated. This wasn’t the case with the previous law.
These are some of the immediate changes you can see with the new tax law. Whether they’re for better or worse
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