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A popular quote from Benjamin Franklin reads, "In this world nothing can be said to be certain, except death and taxes."
Well, if recent years are any indication, that idiom should probably be tweaked to say, "The only thing certain is death, taxes...and changes in tax laws."
Thanks to the Tax Cuts and Jobs Act of 2017, filing year 2018 is upholding that trend of fluctuation - a series of key changes to tax codes can mean you'll be making some adjustments as your tax clients begin to pour into your office.
While there were more updates than just the ones outlined below, here are five of the most important changes to tax filings for individuals in 2019.
1.) Higher Standard Deduction
The Tax Cuts and Jobs Act pretty much doubled the standard deductions for most folks, whether they're filing jointly or separately. So, for instance, if you're filing separately your deduction has grown from $6,350 to $12,000. If you're married, filing jointly, your deduction swells from $12,700 to $24,000.
2.) Increased Child Tax Credit
Good news for filers with children: the child tax credit has doubled. In a nutshell, the credit is now $2,000 for a qualifying child 17 years old or younger.
Even better news is that more people can take advantage of the credit, as income thresholds that would have eliminated the credit have increased. For instance, individual filers making less than $240,000 a year can now claim the credit for qualifying children; married individuals, filing jointly, can get the credit provided their combined income is less than $440,000.
3.) New State and Local Tax (SALT) Deduction Cap
This change will have the most significant effect on filers from states with higher taxes: the new limit on SALT deductions is $10,000- all-encompassing. That means that all your local income or sales taxes, plus state/local property taxes (including vehicle taxes, where applicable) are now capped to a deduction limit of $10,000.
4.) No More Personal Exemption
While folks may be excited about the higher standard deduction for 2018, there is a catch: the popular personal deduction has been eliminated entirely. The personal deduction was income that filers could exclude from their taxable income. In the past, you could claim a deduction for yourself, plus additional deductions could have been taken for a spouse and any children - not any more under the new code.
5.) Changing Educational Benefits
The bad news here is that the deduction for tuition and fees has been eliminated. The good news is that the American Opportunity and Lifetime Learning credits are still there for filers who qualify.
On a similar note, filers who've invested in a 529 savings account are no longer locked in to using those funds strictly for college - they can be used for education at almost every level, including private elementary and high schools. There are certain qualifications that need to be met to use a 529 for private elementary and high school education, so make sure you address those with your clients on an individual basis.
Again, this is not a complete list. There are other changes to the 2018 fiscal year tax filing process that could affect your clients. Ensure youâ€™re up to speed on all of them. A good legal tax resource can help.
Want more on these tax changes for filing year 2018? There's a nice breakdown with tables available in this recent Motley Fool post. You can also get some analysis/insight in this USA Today® article.
And if you liked this post, read more like it at Lexis® Legal Advantage, an online community focusing on legal trends, insights, lifestyle and more.
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