In December, a new Tax bill was signed into law and became effective in 2018. When you file your 2018 taxes, there will be some major differences to the traditional way we have calculated our taxes. Here are three changes to US taxes effective in 2018:
- No more personal and dependent exemption deductions. This will be the biggest impact for American families, but don’t think it’s all bad news, because standard deduction amounts will almost double. However, those with multiple dependents may see a smaller deduction than years past.
- Limits on deductions for state and local taxes, and mortgage interest payments. The average American likely won’t notice a difference in these limits. State and Local tax payment deductions is capped at $10,000 for married couples filing jointly, and mortgage interest payments are capped at $750,000 for the same couple (down from $1 million in years past).
- Tax brackets have been updated. This will be the most impactful change for most Americans. Your salary range determines which tax bracket you fall into, and those brackets determine the percentage of your income owed to the government. You can review these brackets at https://taxfoundation.org/2018-tax-brackets/
Nearly all Americans will be impacted by these changes in some way. If you’d like to calculate how they will impact you next year, try this tax calculator: https://www.marketwatch.com/story/the-new-trump-tax-calculator-what-do-you-owe-2017-10-26