The Republican-controlled Congress managed to pass its tax plan by just 24 votes, taking large cuts across the board with many amendments to deductions, penalties, and more, including complete eliminations. Many of these effects won’t take place until you file your 2018 tax return in April 2019, but some will affect your tax return due in just a few months, in 3 major ways.
Income tax rates change starting January 1st, so you’ll see a larger paychecks as early as February. This also means that you’ll have a higher AGI than expected when filing. Don’t expect a huge pay bump, however; the tax rate has been cut by 1-3%, whether you file single or married.
Although Republicans tried to repeal and replace the ACA and ultimately failed, they did slip a clause into the tax plan that eliminates the individual mandate that financially penalizes those that do not have health insurance; however, this does not take effect until next year.
The healthcare change that will affect your 2017 tax returns applies to deducting medical expenses. If medical expenses exceed 7.5% of your gross income, you can deduct all expenses above this amount.
Instead of gradual deductions over a period of time, businesses will be able to take full expensing of capital investments for purchases made after September 27, 2017, which will be allowed for the next 5 years before being phased out. This will allow some businesses to see the benefit as soon as this year’s tax filing.
In 2018, prepare to learn more about how the new tax plan will change your tax filing for 2019. Although the major change to the tax code benefits corporations, all American taxpayers will be affected, especially if you have a mortgage, children, donate to charity, move homes, pay alimony, and more. Many are concerned about the standard tax deduction, which will almost double to $12,000. This will not apply to this year’s filing, but next year’s, along will most other provisions.
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