As you are almost certainly aware by now, there are some major changes to the tax code that came through the 2017 Tax Cuts and Jobs Act that went into effect for the 2018 tax year. This means there are likely to be some big changes in the way you prepare and file your taxes this year.
What can you expect to change with your tax filing in Oklahoma City, OK this year? Here’s some information to know.
There are still seven tax brackets under the new tax law, but now they have different rates. These rates are generally lower than the previous system, though the rate stays at 10 percent for the lowest tax bracket. Income thresholds were also increased for these brackets, meaning the highest brackets now apply to fewer higher-earning Americans than they did previously. Your tax preparation specialist can provide you more detailed information about these changes and the bracket you now fall in.
The standard deduction almost doubled from its previous levels, which means fewer people are likely to itemize on their taxes. Itemizing your deductions involves adding up all the individual tax deductions you could benefit from and then subtracting them from your adjusted gross income. The majority of Americans will take the standard deduction, because it will get them more money. Now, some tax prep specialists say it could be as many as 95 percent of people who take the standard deduction.
The personal exemption no longer exists under the new rules. This means that even though people are getting much more out of the standard deduction, that doesn’t mean they’re getting much bigger tax breaks.
The personal exemption was the amount of money Americans were allowed to exclude from their taxable income. Americans could claim a personal exemption for themselves, their spouse and each dependent. Each exemption was effectively a $4,100 tax deduction. This has now been eliminated as a means of simplifying the tax code.
Child tax credit
To help alleviate the loss of the personal exemption, the child tax credit has been nearly doubled, and more of it is now refundable with fewer restrictive income limitations. Note that a credit works differently than a deduction—a deduction lowers your taxable income, while a tax credit reduces how much you owe dollar for dollar. Think of a credit as money in the bank. Now, the child tax credit is $2,000 per qualifying child under the age of 17. The phase-out thresholds for the child tax credit are also much higher than they used to be, meaning more parents are able to take advantage of these tax credits.
There are many more changes to the tax code that you should be aware of, including education tax breaks, changes to charitable contributions, mortgage interest and other types of deductions.
For more information, or for help with tax filing in Oklahoma City, OK, contact the office of Chrisman & Chrisman Financial Services today. We look forward to working with you!
Categorised in: Tax Filing
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