How will Tax Reform affect me?
Some of the highlights for taxpayers include:
- Increased Standard Deduction
- Increased child tax credit
- Elimination of dependent and personal exemptions
- Elimination of certain itemized deductions
- 20% deduction for "pass-through" entities (sole proprietorship, partnership, S Corp)
What does it all mean?
Standard Deduction vs Itemized Deductions:
If you normally claim the standard deduction you will continue to claim the standard deduction but with higher benefits. If you normally itemize your deductions you may benefit from the higher standard deduction and not need to itemize on the Federal Return. Note: At this time, you will probably still want to itemize on the Alabama Return.
Family with Kids
The dependent exemption deduction has been eliminated, however the child tax credit has doubled from $1,000 to $2,000. The law also added a new, non-refundable credit of $500 for dependents OTHER than children.
Self-Employed, S Corps, and Partnerships
If you are self-employed, have a partnership or S-Corp the new law includes a 20% qualified business income deduction for certain entities.
What do you need to do?
Because of the changes to the 2018 tax laws definitely see an experienced tax professional!