February 18, 2019
The standard deduction for 2018 nearly doubles to $12,000 for single filers and $24,000 for jointly filing couples.
Taxpayers will only need to specify if your expenditure in categories such as mortgage interest, state and local income taxes and various deductions exceeds this amount. However, the new law has changed what you can deduct: The deduction for state and local taxes, including property, income and sales taxes, is now limited to a maximum of $10,000. The interest on home equity loans can't be deducted unless the taxpayer uses the money to improve the home. Job-related expenditure is no longer deductible, including unreimbursed travel costs, equipment, continuing education, uniforms, license fees, professional examinations and medical tests required.
Under the new law, the deduction of casualty losses is only permitted if the losses occurred in a federal disaster area. If a taxpayer itemizes, donations to charity may still be deducted.
The limits on cash contributions rise from 50 percent previously to 60 percent of adjusted gross revenue.
The elimination of the personal exemption offsets the doubling of the standard deduction. In 2017, every household member could deduct $4,050. This could disadvantage families.
Last year, for example, a single person could exempt a minimum of $10,400 from taxes-$4,050 for personal exemption plus a standard deduction of $6,350.
This year, the new standard deduction can be deducted at least $12,000. On the other hand, a couple married to two children could have exempted at least $28,900 last year ($16,200 in personal exemptions plus a standard deduction of $12,700 for joint filers). That's like this year's $24,000. Because of other changes in the tax code, in particular the child tax credit, families are still likely to pay less taxes for 2018.
Under the old law, families received a $1,000 tax credit per child under 17. The new law doubled that to $2,000. And because it’s a credit versus a deduction, that amount is subtracted directly from taxpayer's tax bill.
Plus, up to $1,400 per child s refundable even for households with no federal tax liability. That means low-income families can get that credit just by filing a return, even if they don’t pay federal income taxes.
The law also raised the income ceiling to qualify for the credit. For the 2017 tax year, the credit started to phase out for single parents with an income more than $75,000 and couples with an income more than $110,000. The phase-outs now are at $200,000 and $400,000 respectively.
The new law creates a new $500 loan for dependents who are not eligible for the $2,000 child tax credit. Those eligible for non-child credit include children between the ages of 17 and 23 if they are students; relatives, including grandchildren, parents, grandparents, siblings, aunts, uncles, nieces or nephews, and non-relatives if they are a household member. The credit applies in all these cases only if the tax filer provides more than half of the financial support of the dependent during the year.