3 Highlights of the New Tax Reform Act that affect Individuals
A new set of tax laws were passed Trump Administration recently. Here’s a breakdown on how these changes will affect people who file as individuals.
Lower Tax Rates Most taxpayers will owe less federal income taxes in 2018. I’ve already prepared tax returns for 2017, and each of my clients would have paid less federal income tax if we could somehow apply these brand-new laws. These new rates really add up. On average I’m noticing that my clients should be paying of $2,000 to $3,000 less federal income tax. This certainly is good news in planning for 2018. If you are an employee, you should see a decrease in the amount of federal income tax withheld from your paychecks around the middle of February. The payroll tax withholding tables have been adjusted to reflect the impact of the new tax laws.
Increase in Standard Deduction
For a couple filing as married filing jointly, the standard deduction is doubling to $24,000. This means that some of my clients will no longer have to itemize deductions on Schedule A. This is kind of a double-edge sword since the reform act also did away with the personal exemption deduction.
For couples divorcing in 2018, the ex-spouse that pays alimony will no longer be able to deduct it from taxable income and the ex-spouse that receives alimony will not have to report it as income. This does not affect divorces enacted prior to 2017. Taxes are now one more thing folks will really have to take into consideration when they are married.