The press has been full of talk about the impact of the new tax bill on individuals who file itemized deductions. We continue to have seven graduated tax levels, but the expansion of the lower tax categories or levels will help the middle class substantially.
Also helpful to smaller families is the increase of the standard deduction (including exemptions) to $24,000 for married couples filing joint, $18,000 for individuals filing as head of household and $12,000 for singles and taxpayers filing married but separated.
The $4,000+ exemption per person is gone.
For the elderly and disabled, there is an additional $1,600 for unmarried persons and $1,300 for qualified married individuals.
Those taxpayers choosing to deduct itemized expenses rather than taking the standard deductions will find some changes.
State income tax and local property taxes will be limited to the actual expenses or $10,000 whichever is lower. Foreign real property taxes are no longer deductible.
Medical expenses for 2018 will have to exceed 7.5 percent of the AGI to be deductible. Charitable mileage will be indexed and the maximum charitable deduction will go up to 60 percent of the AGI.
Most of the miscellaneous deductions subject to the 2 percent floor are gone.
There are a number of other interesting changes such as the changes in alimony. Beginning with new divorces in 2018, alimony payments to an ex-spouse will no longer be deductible.
Re-characterizations of IRA accounts will undergo changes. Moving expenses except for active duty military will disappear. Casualty loss will likewise disappear unless there is a designation of a disaster zone.
The child tax credit is increased to $2,000 per qualified child with reimbursement maxed at $1,499 per qualified child. To get this credit, each qualifying child’s social security number must be provided.
For more information consult your tax professional.
Virginia Moryadas is a tax preparation professional in Bluffton.