There were a lot of changes announced when the Tax Cuts and Jobs Act of 2017 (TCJA) was revealed at the end of year. The new tax law for 2018 has fully eliminated many exemptions and taken taxpayers by surprise. One of the most surprising is the personal exemption. The TCJA has suspended all personal and dependent exemptions for tax years 2018 through 2025. Each exemption lowered taxable income by $4,050 under the former law. That is gone for 2018.
What the future holds is still unknown but at this time, the elimination will substantially increase taxable income for large families. However, enhancements to the standard deduction and child credit, combined with lower tax rates, might mitigate this increase. The help comes in the form of higher standard deductions.
Lawmakers have said they believe that increasing the standard deduction and removing several deductions, as well as the personal exemption, will better position taxpayers to lower the total liability in their 2018-19 tax returns thereby making the tax filing process simpler and smoother.
Here’s what the changes look like:
| Standard Deduction in 2017 | Standard Deduction in 2018 |
| Single Filers: $6,350 | Single Filers: $12,000 |
| Head of Household Filers: $9,350 | Head of Household Filers: $18,000 |
| Married couple filing jointly: $12,700 | Married couple filing jointly: $24,000 |
Keep in mind that the way the change affects you will differ depending upon your particular tax situation and filing status. But, for most taxpayers it may still result in lower taxes overall.
Bottom line: the new tax code is complex and cumbersome for business. To navigate the new legislation, you need trusted experts and advisors who understand the nuances of accounting. We are here for you! Visit us at TYSLLP.com.
SOURCES:
CNBC.com
https://www.cnbc.com/2018/02/16/10-tax-changes-you-need-to-know-for-2018.html
Internal Revenue Service – IRS.gov