If you’ve been wondering how the new tax laws will affect you going forward, we’ve got you covered.
A number of changes have been put into place, most of which will affect you during the following 2018 tax year, although there are some changes that will apply to the current 2017 tax season. Because each taxpayer has a different situation, it’s important that you understand your own finances and tax liabilities to be sure you fully understand the changes to tax laws.
Protect yourself and your hard-earned money with knowledge, and use some tried-and-true tips to help make tax time easier, every year.
When do changes start taking place?
You probably don’t need to worry about redoing any of the 2017 taxes that you’re preparing to submit this year; most tax law changes will go into effect for your 2018 taxes, which will be filed in 2019.
However, there are a few changes that affect 2017’s taxes, and some that even retroactively affect 2016’s taxes. Some of these may actually work in your favor, so if you qualify, you may want to file an amended return.
Changes related to deductions for the 2017 tax year
Only a few changes will affect you this tax season, but you may be eligible for some additional money now if you claim any of the following deductions:
- Medical Costs: One of the changes that will affect filers who itemize deductions this year is the ability to deduct qualifying medical expenses exceeding 7.5% of your adjusted gross income. Before the change, filers could claim anything over 10%, so you may end up getting some more money back.
- Personal Casualty Losses: Unexpected property damage due to weather events or other accidents can be claimed if the loss meets specific criteria. You’ll need to verify ownership of the property to the IRS; for example, if you were in a car accident that was no fault of your own, you’d need to show that you do own the car. You also need to record any insurance payments or legal settlements that go towards covering the cost of your loss.
The primary change to be aware of with a casualty loss deduction is that you no longer need to itemize deductions to claim it, as any loss over $500 will be added to the standard deduction. This break is also retroactively applied to tax year 2016 to cover areas affected by federally declared disasters, such as flooding.
- Business Property:Any depreciating business asset that you claim, from computers to furniture to manufacturing tools, can be deducted after depreciation is calculated. A change that affects tax year 2017 is that you can now deduct the entire cost of an asset in the year you start using it. That means even if you purchased a depreciating asset in January of 2017, you could claim the entire cost for that tax year.
- State and Local Taxes:While changes related to state and local tax deductions are coming down the pipeline in future years, for the 2017 tax season, it’s important to know that you cannot claim a prepayment of next year’s tax on your current year’s return.
Changes to prepare for in 2018
Most of the changes in the new tax law will go into effect for the 2018 tax season, but preparing for them now will help you better understand your tax liabilities going forward.
- The standard deductionwill be doubled: from $6,500 to $12,000 for individuals, and from $13,000 to $24,000 for married couples.
- The Child Tax Credit will expand from $1,000 to $2,000 for families making under $400,000.
- New mortgage interest can be deducted up to $750,000, and existing mortgages will have no change to interest deductions. Interest from home equity loans cannot be deducted going forward.
- The individual mandate penalty for health insurance coverage will be removed.
- Individuals can deduct up to $10,000 in state and local taxes, but have to choose between income tax, sales tax, or property tax.
- The corporate tax rate is lowered from 35% to 21%.
- Expect 1% to 4% reductions in the majority of tax brackets for individuals earning over $9,525 a year, or married filers making over $19,050.
- Most itemized deductions will be eliminated, including moving expenses.
- Receivers of alimony can deduct payments, while payers of alimony no longer can.
- The estate tax exemption will be doubled, allowing for $11.2 million for individuals and $22.4 million for couples.
Common taxpayer questions about the new tax laws
If you’re still figuring out how you are affected by the recent changes to tax laws, you’re not the only one. Luckily, most taxpayers have a year to figure out how they’re impacted going forward, but that doesn’t mean you don’t have questions about what to do now.
Do I need to redo my taxes now?
Chances are you’re not affected by the immediate changes of the tax law, but it’s always a good idea to verify this with an accountant or tax preparer if you have questions.
Should I take an extension?
You can file an extension if you can’t have your returns prepared by the deadline of Tuesday, April 17, 2018. Of course, the later you file your return, the longer it will be until you get your money. However, if you’re concerned that you may be impacted by some of the immediate changes affecting this year’s taxes, filing for an extension may allow you additional time to claim as much money as possible.
Should I change my W-4?
If you’re paid via salary, your employer will follow the IRS’ income tax withholding standards released for the upcoming year. This will give you a general idea of what to expect in your paychecks going forward and will help you decide whether to withhold more or less depending on your situation.
Essential tips to get your refund fast
Whether your situation has changed or not due to recent tax laws, there are two ways to ensure you get your refund money as quickly as possible.
E-file: The IRS encourages taxpayers to submit their returns electronically, and will reward you with a faster refund. Paper returns take longer to process as they must be digitally uploaded by IRS employees, so you can skip a step and any delays in the mail by e-filing through an IRS-recommended system.
Direct Deposit: The IRS also rewards taxpayers who elect to use the direct deposit option for their refund. Rather than waiting for a check, the IRS sends funds straight to your bank, usually in a matter of days. To take advantage of direct deposit and get a speedier refund, you’ll need to provide any account details on your return. If you don’t have a bank account, try getting a Green Dot Prepaid Visa® Card which allows you to get your return faster than a paper check while giving you the ability to use that money anywhere Visa Debit is accepted in the U.S.
As an added bonus, when you direct deposit your federal refund to your Green Dot card, you’ll be automatically entered to win one of over 4,000 prizes, worth over $75,000! You’ll get five entries for your refund, so give yourself a chance to make even more money back while making sure you get your refund quick. No purchase necessary. See official rules.
Take the stress out of tax time and get your return as fast as possible by using a prepaid debit card. Get your very own Green Dot Prepaid Mastercard or Visa Card today, and you could see your tax refund money in a couple months. View Green Dot’s simple fees.