7 Things You Need To Know About The Incoming Tax Law
By: Malory Wood of The Missing Ink
As you may be aware, President Trump signed into law the first major tax renovation since Reagan held office. Some people will not be heavily affected by the new tax changes; however, millions of American taxpayers will be burdened come tax season next year. From elements no longer being deductible to increased tax credits, here are the top 7 things you need to know regarding the new tax laws:
Individual and Corporate Tax Rates Will Be Impacted
Not only will individual tax rates be impacted this incoming tax season, corporate tax rates will be equally as affected. Individual provisions, legally, will be terminated by the end of 2025, although many believe the future of Congress will have a hand in not allowing them to expire. The majority of the corporate provisions, however, will be constituted as a permanent change.
The Deficit Will INCREASE
Contrary to popular belief, the country’s deficit will be increasing by over $1.46 trillion once the new tax law provisions go into effect. The deficit is believed to continue to increase to reach a staggering new height if the individual tax cuts are decided to be re-upped in eight years’ time.
Personal Exemption Will Cease to Exist
Typically, a person has the ability to claim approximately $4,050 in personal tax exemptions for themselves, dependents, their spouse, etc. The personal exemption aided in lowering any taxable income one may accrue. After the new tax law goes into effect, this will cease to exist. Many families will be put into peril without this governmental assistance and may be stuck with other tax burdens that are associated with the reform package.
Local and State Tax Deductions Will Be Capped Off
Say so long to the days of local and state tax deductions not having a cap. A new $10,000 cap will serve as a limiting device to those who chose to itemize their taxes. No longer will tax payers be afforded the privilege to deduct an unlimited amount of money for local and state property taxes, including sales and income taxes.
New Tax Credits
Finally, there is some good news! Taxpayers will have the ability to claim a new $500 credit for dependents that are not children i.e. elderly parents. Additionally, the child tax credit has now been increased from $1,000 to $2,000 for anyone under the age of 17. More people will be able to take advantage of this new credit and can be claimed by single parents with incomes up to $200,000 and married couples who earn up to $400,000 annually.
Bye Bye Certain Tax Deductions
Divorce agreements that include alimony payments used to be tax deductible for the person paying alimony, but this is no longer the case. Alimony payments are no longer deductible, and this new law applies to any couple engaging in the signing of divorce paperwork after the last day of 2018.
Additionally, if you have had the privilege of deducting moving expenses when relocating for work, you can say goodbye to having the U-Haul and other costs deducted from your taxes. This is also the case for people who choose to have professionals prepare and file their taxes on their behalf; tax preparation tax deductions will soon be obsolete.
And most shockingly, those who experience devastating loss due to natural disaster, including storm, fire, theft, etc., who are not properly covered by insurance, will experience their losses to be non-deductible. Through the year 2025, people may only deduct their losses if they qualify as “eligible”. Here is the kicker: the loss must have occurred due to an official natural disaster. Therefore, if you lose your home to an unofficial, random house fire, you are not eligible.
Business Owners’ Tax Breaks
Business owners, S-corporations, shareholders, partners, owners, partnerships, and LLCs will receive a 20% lower deduction than previous years. This new law will be enforced to ensure business entities do not take advantage of the system, being that they pay for their business taxes through their individual tax returns. Some tax experts continue to remain skeptical regarding this provision.
CAM Financial & Tax Services is here to answer all of your tax-related questions with professional, expert advice from our highly-trained staff. Customer service and maximizing your deductions are our highest priority. We provide full tax preparation services for partnerships, corporate, and individual federal and state incomes. Please call us today toll-free at (973)759-4045 to get started on your tax returns today!
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