The tax reform bill could mean more money in your paycheck, and it may already have happened.
The U.S Treasury estimates about 90 percent of us will see more take-home pay. But, keep that excitement in check for now.
"This tax law came at us very quickly and right at the end of the year when it didn't give us a lot of time to prepare for it." said Gerald Spivey with H&R Block.
The issue is that you could end up getting too much money or maybe not enough. It all depends on how you filled out your W-4 and right now it’s a guessing game.
Spivey says you should not change your withholdings for now.
"What the individual needs to do is sit down and see how it's going to affect them individually based on their situation," he said. "Once they do that there will be plenty of time to change that, it doesn't hurt to even wait until mid-year to change."
The tax reform happened so fast, that many companies have yet to be briefed on the new guidelines to help their employees fill out their W-4 to fit this new reform.
The IRS says it will be publishing a new online calculator by the end of February that will help you decide how to adjust your allowances based on your personal and financial situation.
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If you’re wondering how you’re affected, not to worry, we have your back. We’re doing the work to make sure our products are up to date and that you can use them to file your taxes with complete confidence.
That said, many folks are wondering what’s in the bill and how it might affect them. Here’s a recap of some of the major tax provisions in the new tax bill and how they may impact you.
Increased Standard Deduction: The new tax law nearly doubles the standard deduction amount. Single taxpayers will see their standard deductions jump from $6,350 for 2017 taxes to $12,000 for 2018 taxes (the ones you file in 2019). Married couples filing jointly see an increase from $12,700 to $24,000. These increases mean that fewer people will have to itemize. Today, roughly 30% of taxpayers itemize. Under the new law, this percentage is expected to decrease.
Increased Child Tax Credit: For, families with children the Child Tax Credit is doubled from $1,000 per child to $2,000. In addition, the amount that is refundable grows from $1,100 to $1,400. The bill also adds a new, non-refundable credit of $500 for dependents other than children. Finally, it raises the income threshold at which these benefits phase out from $110,000 for a married couple to $400,000.
Personal and Dependent Exemptions: The bill eliminates the personal and dependent exemptions which were $4,050 for 2017 and increased to $4,150 in 2018. State and local taxes/Home mortgages: The bill limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes have generally been fully tax deductible. The bill also caps the amount of mortgage indebtedness on new home purchases on which interest can be deducted at $750,000 down from $1,000,000 in current law.
Health Care: The bill eliminates the tax penalty for not having health insurance after December 31, 2018. It also temporarily lowers the floor above which out-of-pocket medical expenses can be deducted from the current law floor of 10% to 7.5% for 2017 and 2018. So for 2018, you can deduct medical expenses that are more than 7.5% of your adjusted gross income as opposed to the higher 10%.
Don’t worry about memorizing these tax changes the majority of which are for 2018 taxes that you file in 2019. Fastax has you covered and will be up to date with the latest tax laws. Call us for tax help at 661 493-8512