5 Quick Highlights of the New Tax Law

Shelley Yates, Communications Senior Advisor
November 5, 2018

As 2018 winds to an end, it’s time to both look back on the prior year and look forward into the new year. That also means it’s almost tax time, and this year may look a little different. The Tax Cuts and Jobs Act of 2017 brought sweeping changes to the tax landscape, and your clients may have already inquired about just how it affects them.

While the changes can affect each person or business differently, here are five things everyone needs to know:

  1. Standard deductions? Make it a double. The standard deduction amount has nearly doubled for 2018. Meanwhile, many personal and dependent deductions have been eliminated. Many are expecting the number of people who take the standard deduction, versus individually itemizing deductions, to increase significantly.1 You may want to consider how this might impact tax season for you, as well as your clients.
  2. To have and to hold from this day forward: lower tax brackets. As shown in the table below, the tax brackets have changed — in most cases, for the better. Also, the “marriage penalty” of jumping to a higher tax bracket by combining incomes has been eliminated, except for couples earning more than $300,000.2

  1. Nest eggs have become a hard egg to crack. For starters, Roth conversion can no longer be recharacterized. Contribution limits have been raised for certain retirement plans, such as 401(k)s and 403(b)s. Income phase-out ranges for IRA contributors have also changed. Social Security benefits and withholding thresholds have both increased. With all of the tax changes that have come to retirement savings, it’s perhaps never been more important for your clients to consult their trusted CPA for advice.3
  2. The new tax law may rub SALT into the wound. The state and local tax (SALT) deduction for income and property taxes is now capped at $10,000, which could have a negative impact on taxpayers in states with high state and local taxes.4
  3. AMT victims may finally get a reprieve. As you know, families with higher incomes have historically had to calculate their taxes under the standard tax system and under the alternative minimum tax (AMT) system and pay whichever was higher. However, because the AMT didn’t keep up with inflation, it started to affect an increasing number of taxpayers. The new tax law adjusted the amounts for inflation, which means many that were previously affected by AMT will not be anymore.5

These five items are just a few of the many changes to America’s tax code. However, the most important thing for your clients to know about the new tax law is who to turn to for advice. Your clients likely have questions – who better to answer them than you?

 

 

1AARP. https://www.aarp.org/money/taxes/info-2018/new-standard-deduction-fd.html

2Wisebread. https://www.wisebread.com/12-things-you-should-know-about-the-new-tax-law

3Time. http://time.com/money/4990121/401k-ira-contribution-limits-2018/

4Smart Asset. https://smartasset.com/taxes/trumps-plan-to-eliminate-the-state-and-local-tax-deduction-explained

5The Motley Fool. https://www.fool.com/taxes/2017/12/29/your-complete-guide-to-the-2018-tax-changes.aspx

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