The Tax and Jobs Act is the first major piece of tax legislation affecting individuals and corporations since the Reagan administration. And, while it has come with significant feelings on either side of the aisle, it is President Trump's first significant legislative victories of his presidency. Regardless of your political leanings, when the rubber meets the road, how does this affect you and your family financially? While promoted as a benefit to middle class America, is that really what we'll find?
Here are some quick facts and an accompanying piece to help bring you up to speed on tax changes that will affect us when we complete our tax return April 2019:
1.) Tax rates have changed. While we still have seven tax brackets, whether filing single or joint, most of the bracket percentages have gone down. That said, the amount of adjusted gross income that determines which brackets your money is affected by has been changed too. So, pay close attention to the brackets provided in the accompanying piece.
2.) Deductions and Personal exemptions. While the standard deduction increases regardless of your filing status, your personal exemptions and deductions have been changed or eliminated. This will most quickly affect those deducting state and local property tax in excess of $10,000/year. It will also begin to disallow us from deducing tax preparation expenses, unreimbursed business expenses (such as the home office deduction), and the deduction of investment advisory fees. Other changes have occured, so pay close attention to the piece provided.
3.) Tax Change for business. One of the most notable features of the bill is the permanent tax rate change to 21% for corporations. While other changes are now in place, this significant change is President Trump and Congress' push to increase business production and jobs in the U.S. Time will tell if it has a favorable impact. However, even now I have seen news reports of businesses like AT & T providing bonuses and favorable changes in anticipation of the affects of this tax bill.
So What Now?
This new tax law will certainly affect every tax paying American, some more than others. Regardless, it provides opportunities for tax and financial planning that the proactive person can take advantage of. While the dust settles, I would advise discussion with your tax and financial planning expert in order to re-evaluate your situation and make the most of the impacts of these changes on your personal financial situation. With the right advice and evaluation of your specific needs, I believe these changes could have a positive impact on many families lives, and hopefully your own too!