How will the new tax bill affect me?
Eileen St. Pierre, The Everyday Financial Planner
The new tax bill,The Tax Cuts and Jobs Act, exceeds 500 pages. While the cut in the corporate tax rate is permanent, cuts to individual tax rates are temporary. They expire in 8 years at the end of 2025. This means your taxes will go up in 2026 if these cuts are not made permanent.
Here are a few of the major changes:
- The standard deduction will increase to $12,000 for singles and $24,000 for married couples filing jointly. It’s estimated that 94% of us will be better off taking the standard deduction than itemizing. That should make filing your taxes much simpler for those who no longer have to fill out Schedule A.
- Personal exemptions are eliminated. Taxpayers currently subtract $4,150 from income for each person claimed. This may hurt families. The increase in the standard deduction may not be enough to offset this. This feature of the bill was not advertised very much to the public.
- The child tax credit will double to $2,000 per child. Up to $1,400 of the total credit will be refundable for low income taxpayers – refundable means you get this amount of the credit back even if you do not owe any taxes.
- Starting in 2019, those paying alimony will not be able to deduct these payments. However, those receiving alimony will no longer be taxed on these payments.
- Except for the military, you will no longer be able to deduct moving expenses.
- Your deduction for property, state and local income taxes is capped at $10,000.
- The penalty for not having health insurance (i.e., the Obamacare mandate) will be repealed in 2019. The entire Affordable Care Act was not repealed – just the mandate.
The law goes into effect next year so it will not change the amount of any tax refund you may receive when you file your 2017 taxes early next year. But you will see a little more money in your paychecks in January when the new tax rates start.