Between the IRS and the recent changes in the tax law, here are a number of significant changes that will impact taxes now and going forward.
Those who are married and filing jointly will have an increased standard deduction of $24,000, up from $13,000 as under previous law.
Single taxpayers and those who are married and file separately now have a $12,000 standard deduction, up from the $6,500.
For heads of households, the deduction will be $18,000, up from $9,550.
The personal exemption has been eliminated with the tax reform bill.
A new 37 percent top rate will affect individuals with incomes of $500,000 and higher. The top rate applies for married taxpayers who file jointly at $600,000 and over.
The estate tax exemption doubles to $11.2 million per individual and $22.4 million per couple in 2018.
The child tax credit has been raised to $2,000 per child — those under 17 — up from $1,000. A $500 credit is available for dependents who do not get the $2,000 credit.
The deduction for mortgage interest is capped at $750,000 for mortgage loans taken out after Dec. 15 of last year. The limit is still $1 million for mortgages that were established prior to Dec. 15, 2017.
The itemized deduction is limited to $10,000 for both income and property taxes paid during the year.
Employees who participate in certain retirement plans ‒ 401(k), 403(b) and most 457 plans, and the Thrift Savings Plan – can now contribute as much as $18,500 this year, a $500 increase from the limit for 2017.
Savers who contribute to individual retirement accounts will have higher income ranges following cost-of-living adjustments. Note that the deduction phases out for individuals and their spouses who are covered by workplace retirement plans. For single taxpayers, the limit will be $63,000 to $73,000. For married couples, the phase out range will vary depending on whether the IRA contributor is covered by a workplace retirement plan or not. When the spouse who is investing has access to an employer plan, the range is $101,000 to $121,000.
For individuals who don’t have a retirement plan but are married to someone who does, the phase out has been raised to $189,000 to $199,000. The phase out was not adjusted for married individuals who file a separate return and who are covered by a workplace retirement plan. That range is $0 to $10,000.