Well here we go as we end the 2018 tax year. I just spent the last week studying the drastic 2018 Federal income tax changes. My head is spinning with so many updates and changes and believe it or not I do not have all the answers yet.
With change comes fear... I do want everyone to know that whether we agree with the all the changes or not we are all in the same boat for 2018 and beyond. The good news is that if you are a current income tax customer you won't have to travel alone on this income tax journey. That is the very reason a majority of you you have hired me to take the stress away every tax season.
Commercial Time: If you have not yet hired me to prepare your income taxes I would love the opportunity to help you and your family out.
The question everyone keeps asking me is how is this going to affect me personally and will I owe more money to the IRS? This is such a hard topic to answer is a sentence or two. So I will be brief... Based on looking at most of my clients taxes for 2017 it appears that these 2018 income tax changes will have an effect on everyone. There are some good changes that will help most and some bad changes that will make it much harder on your paychecks.
I can guarantee you this that with the 2018 income tax law changes I will do everything legal in order to minimize your tax liabilities for 2018 and beyond.
The Biggest Changes: GOOD
Under the Tax Cuts and Jobs Act the standard deduction amounts will increase to $12,000 for individuals, to $18,000 for heads of household, and to $24,000 for married couples filing jointly and surviving spouses in 2018.
Most with real estate and donations will still prepare a schedule A. Each tax return will be analyzed to see what is going to be the best strategy to reduce taxes.
Contribution Percentage Limitations:
Under the Tax Cuts and Jobs Act the 50% limitation for cash contributions to public charities and certain private foundations is increased to 60% of adjusted gross income. Contributions exceeding the 60% limitation are generally allowed to be carried forward and deducted for up to five years, subject to the later year’s
ceiling. Additionally, no charitable deduction would be allowed for any payment to an institution of higher education in exchange for which the payor receives the right to purchase tickets or seating at an athletic event.
Child Tax Credit:
Under the Tax Cuts and Jobs Act (TCJA), the amount of the Child Tax Credit (CTC) is increased to $2,000 per qualifying child; The income levels at which the credit phases out are increased to $400,000 for married taxpayers filing jointly ($200,000 for all other taxpayers) (not indexed for inflation).
The Biggest Changes: BAD
Miscellaneous Itemized Deductions:
Under the Tax Cuts and Jobs Act, the deduction for miscellaneous itemized deductions that are subject to the 2% floor is suspended. Therefore, no miscellaneous itemized deductions may be claimed by an individual on Schedule A of Form 1040 for tax years 2018 through 2025. These deductions include unreimbursed job
expenses, tax preparation fees and investment fees and expenses
Qualified Moving Expenses Deduction:
The Tax Cuts and Jobs Act provides that for tax years beginning after December 31, 2017 until January 1, 2026, the deduction for moving expenses is suspended, except for members of the Armed Forces on active duty who move pursuant to a military order and incident to a permanent change of station
Tuition and Fees Deduction:
The Tuition and Fees Deduction expired under previous law and was not renewed by the Tax Cuts and Jobs Act.
This is a very short list of changes I thought you might be informed of today.
I don't want you to panic yet.
We will all get through this changes for 2018 and beyond.
The Good News
With all the changes coming up in the new year there will be no better time to prepare a financial plan for this year and beyond.
This will be the year that we all have to consider increasing are pre-tax contributions in order to drastically reduce the increase of taxes owed.
I know that I have some smart clever financial strategies for all of you to reduce your taxes and save more and will provide more information in the months to come.
Ok I think that is enough for today....
Stay tuned for more great stuff from John Bustrum Financial.
Cheers, God Bless
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