With the Tax Cuts and Jobs Act bringing huge changes under the new tax law, you’re not alone if you’re wondering what that means for your personal return. To clarify, here’s a snapshot of 5 key changes under the new tax law for personal tax returns:
1. Increased standard deduction
One of the biggest changes of TCJA is the near doubling of the standard deduction for all taxpayers. For 2018, the standard deduction amounts are:
- $24,000 for joint filers
- $18,000 for heads of households
- $12,000 for all other individual filers
This increased amount should make it easier for many taxpayers to opt for the standard deduction. Therefore, taxpayers won’t have to do the extra work of itemizing their deductions.
2. Medical expenses
TCJA lowered the floor for claiming deductions for medical expenses to 7.5 percent of AGI for all taxpayers, not just those aged 65 or higher, applicable to 2017 and 2018 only.
One very significant change that went into effect January 1, 2019, is the treatment of alimony. Beginning with divorces and separation agreements entered into after December 31, 2018, alimony or separate maintenance payments can no longer be deducted by the payor. Additionally, they can’t be included in the income of the recipient.
This change does not affect divorce or separation agreements entered into before 2019, nor those altered after 2018 where the changed method of taxation is not expressly stated to apply.
4. State and local taxes
TCJA limits the deduction for state and local taxes to $10,000 per year.
5. Miscellaneous itemized deductions
TCJA eliminated miscellaneous itemized deductions for individuals. This includes deductions for unreimbursed employee expenses.
If you have any last minute tax questions or would like some help planning for next year, contact us. We’ll be happy to help.