Changes in Tax Rates

For 2018, most tax rates have been reduced. This means most people will pay less tax starting this year. The 2018 tax rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%

In addition, for 2018, the tax rates and brackets for the unearned income of a child have changed and are no longer affected by the tax situation of the child’s parents. The new tax rates applicable to a child’s unearned income of more than $2,550 are 24%, 35%, and 37%

In addition to lowering the tax rates, some of the changes in the law that affect you and your family include increasing the standard deduction, suspending personal exemptions, increasing the child tax credit, and limiting or discontinuing certain deductions.

Changes to Standard Deduction

The standard deduction is a dollar amount that reduces the amount of income on which you are taxed and varies according to your filing status. The standard deduction reduces the income subject to tax. The Tax Cuts and Jobs Act nearly doubled standard deductions. When you take the standard deduction, you can’t itemize deductions for mortgage interest, state taxes and charitable deductions on Schedule A, Itemized Deductions.

Starting in 2018, the standard deduction for each filing status is:

Single ....................................................................$12,000 .......(up from $6,350 in 2017)

Married filing jointly. Qualifying widow(er) ............$24,000 .......(up from $12,700 in 2017)

Married filing separately .......................................$12,000 .......(up from $6,350 in 2017)

Head of household ...............................................$18,000 .......(up from $9,350 in 2017)

The amounts are higher if you or your spouse are blind or over ag

Changes to Itemized Deductions

For 2018, the following changes have been made to itemized deductions that can be claimed on Schedule A.

 Limit on overall itemized deductions suspended

Deduction for medical and dental expenses modified.

If you plan to itemize for tax year 2019 your unreimbursed medical and dental expenses will have to exceed 10% of your 2019 adjusted gross income in order to be deductible

Your total deduction for state and local income, sales and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if Married Filing Separate). Any state and local taxes you paid above this amount cannot be deducted.

No deduction is allowed for foreign real property taxes. Property taxes associated with carrying on a trade or business are fully deductible.

Your deduction for mortgage interest is limited to interest you paid on a loan secured by your main home or second home that you used to buy, build, or substantially improve your main home or second home

The limit on charitable contributions of cash has increased from 50 percent to 60 percent of your adjusted gross income.

Miscellaneous itemized deductions suspended.

Deduction and Exclusion for moving expenses suspended

Deduction for personal exemptions suspended

For 2018, the maximum credit increased to $2,000 per qualifying child. Up to $1,400 of the credit can be refundable for each qualifying child as the additional child tax credit. In addition, the income threshold at which the child tax credit begins to phase out is increased to $200,000, or $400,000 if married filing jointly

A new credit of up to $500 is available for each of your qualifying dependents other than children who can be claimed for the child tax credit.

Alimony and separate maintenance payments are no longer deductible for any divorce or separation agreement executed after December 31, 2018, or for any divorce or separation agreement executed on or before December 31, 2018, and modified after that date. Further, alimony and separate maintenance payments are no longer included in income based on these dates

The shared responsibility payment is reduced to zero under TCJA for tax year 2019 and all subsequent years.