Tax season is upon us, and it’s time to figure out if and how changes brought by the Tax Cuts and Jobs Act will affect you. Bear in mind that adjustments have been made in each of these areas:1
- Individual tax income brackets and tax rates
- Standard deduction (doubled)
- Personal exemptions (eliminated)
- Child credit (increased)
- Itemized deductions (adjusted, limited, eliminated)
- Mortgage interest (capped)
- State and local tax exemptions (capped)
- New pass-through income deduction (for qualifying small-business owners)
- Estate tax exclusion (increased)
Recently, the IRS announced it will not penalize taxpayers who underpaid their estimated taxes for 2018 (through W-4 withholding or estimated quarterly payments) — as long as they paid 85 percent of what they owe. Depending on your circumstances and the complexity of your return, it may be a good idea to consult with a tax professional to complete your 2018 taxes as well as help develop a plan for next year. 2
1 Andy Friedman. The Washington Update. Jan. 1, 2018. “Tax Reform Accomplished: How Does the Legislation Affect Investors and Businesses?” http://www.thewashingtonupdate.com/white-papers/public-white-papers/tax-reform-accomplished-how-does-the-legislation-affect-investors-and-businesses/. Accessed Jan. 18, 2019.
2 Allyson Versprille and Laura Davison. BenefitsPro. Jan. 16, 2019. “IRS won’t penalize confused taxpayers following changes to code.” https://www.benefitspro.com/2019/01/16/irs-wont-penalize-confused-taxpayers-following-changes-to-code/. Accessed Jan. 18, 2019.