We hope to see everyone at our upcoming Board of Directors meeting scheduled for Tuesday, January 30 at 6:30 pm. The meeting will be held at the Bethany Center, located off Pheasant Woods Drive in our community.
Virtually all taxpayers will be impacted by the tax reform. Many of the changes will not affect individual taxpayers’ tax liability until they file their 2018 tax return in 2019.
New tax brackets, rates and loss of exemptions impact most taxpayers
The elimination of a more than $4,000 benefit in 2018 for each taxpayer, spouse and qualifying child or relative will affect most taxpayers. This benefit, the personal and dependent exemptions, reduces income. Without it, more of a taxpayer’s income is subject to taxation.
For example, in 2017 a married couple with 2 children has $12,700 standard deduction plus personal exemption (per person $4,000) = $16,000 meaning the first $28,700 income is not taxed
Same couple in 2018 will get a standard deduction of $24,000, the personal exemption is no longer available, and they will have to pay taxes on more than $4,900 of their income they previously wouldn’t have. If they have a tax rate of 15 percent, they will pay almost $735 in additional taxes.
Those who usually itemize deductions, including mortgage interest, real estate taxed paid, charitable contributions, might no longer find it beneficial if the standard deduction is now larger than the expenses they can itemize.
Changes to child-related tax benefits impact families
Also, families will be affected by the loss of the personal exemption of more than $4,000 per person. However, taxpayers whose income falls under $400,000 if married filing a joint return and $200,000 otherwise, will receive an increased child tax credit of up to $2,000 for every qualifying child. Families with dependents over the age of 17 may also qualify for a new family tax credit of $500 per dependent that does not qualify for the child tax credit. The increased child tax credit, new family tax credit, along with the larger standard deduction, may or may not make up for the loss of the personal and dependent exemptions. For larger families and families that previously itemized, the impact of the elimination of the personal exemption will be magnified.
The Corporate tax rate will fall from 35% to 21%, while some related business deductions and credit would either be reduced or eliminated
This information was provided by:
Master Tax Advisor, EA
Van Dyke Commons
Tel: 813 264 9416