What is the child care loan
Everything you need to know about your 2018 tax return
It's tax time again - but this year it will be a little different thanks to the Tax Reform Act of 2018. Some of the items that you are used to on your tax return have changed and you may have some new deductions as well. The really good news? Filing your tax return for 2018 should be a little easier.
Increase in the standard deduction
The standard deduction for 2018 is almost twice that of 2017. If you don't list your prints, this is good news for you. The standard deduction reduces your Adjusted Gross Income (AGI). The lower your AGI, the lower your taxes. Of course, you still have the option of listing prints. It can be a bit of a chore, but it's worth it if your individual prints exceed the standard withdrawal amount.
No more personal liberation
In the past few years you could deduct a certain amount from your income right from the start. For example, you could deduct $ 4,100 from your income in 2017 before doing any other tax calculations - and that was just for you. You can also deduct $ 4,100 for your spouse and an additional $ 4,100 for each dependent. If you have a large family this could be a significant number. That's completely gone this year. If you made $ 60,000 in 2017 and had a family of four, you deducted $ 16,400 in personal exemptions at the top of your tax return, so your taxable income was only $ 43,600. In 2018, all $ 60,000 are now taxable.
Double the child care loan
A tax credit is different from a tax deduction. Deductions reduce your taxable income. Credit notes, on the other hand, reduce the amount of tax actually paid. There is some good news for parents paying for childcare this year. In 2017, your tax bill was reduced by up to $ 1,000 to reimburse you for childcare costs. This year it's $ 2,000. Even if you don't pay any tax, this new provision could potentially give you a refund of up to $ 1,400.
Different tax brackets
There are still seven tax brackets for your 2018 taxes, but the tax rates for each tax bracket have dropped significantly. The income thresholds are also higher. What does that mean? The higher tax brackets apply to very few taxpayers. In 2017, you achieved the highest tax rate of 39.6% with an AGI of $ 480,050 (assuming you are married and sign up together). Now that bracket only applies to those with taxable income of $ 600,000 and the top tax rate is lower at 37%.
Lower mortgage interest deductions
Yes, you can still deduct the mortgage interest you pay - but not as much as in the past. In 2017, you could deduct interest on a $ 1 million mortgage on your primary residence. This year, that mortgage size will drop to $ 750,000, although you could be grandfathered with an older mortgage. After you've deducted interest on a home loan, check how you spent that money. If you've used it to improve your home (and have receipts) it's still deductible. If you've been using it for any other reason, such as: B. because of medical bills or tuition fees, it is no longer deductible.
Drastic restrictions on state and local tax deductions
Traditionally, you can deduct any taxes you've paid to your state from your federal taxes, including property taxes, income taxes, and even sales taxes. However, as of 2018, these deductions are capped at $ 10,000. Some state residents may find that this makes no difference to their overall tax burden. However, those in states with higher taxes - think California, New Jersey, or New York - can feel the effects.
Increased deductions for charitable contributions
If you are the type of person who gives away a large part of your income first thing, what a great person you are! With the 2018 tax changes, you're getting a little more credit. You can now deduct up to 60% of your AGI, an increase from the maximum of 50% in recent years. However, if you make a "donation" to your favorite university to get sports tickets, be aware that the deduction you made in the past no longer applies.
Some small deduction positions are gone
If you have listed individual prints in the past, be aware of these changes as some of your prints may no longer be there. Some also apply to taxpayers who do not provide information. You will no longer be able to deduct work-related relocation expenses if you are not in active duty in the military, loss of accident and theft (other than a federal declared disaster), tax preparation expenses, unreimbursed staff expenses, and many others. Compare your 2017 tax returns to 2018 to see any differences.
You pay less when you inherit a lot of money
We're talking about the estate tax. If you inherited more than $ 5.49 million by the last year, anything over that amount was taxed at 40%. Now, you can inherit $ 11.2 million before this tax rate affects you. Tell these rich relatives to go ahead and write you in their will.
Free tax return is available
The IRS offers free tax software to help you prepare and file your taxes. If your income is less than $ 66,000, the software pays your state taxes as well. Also, find out about the free tax return options from TurboTax and H&R Block. They all process the new 1040 form (1040EZ no longer exists) as well as some of the basic forms. These free choices are a great option if you are reporting all your income as W-2 and not reporting any deductions.
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