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Apr 03, 2019

Still Haven’t Done Your Taxes? Here’s What You Need to Know

William J. Winter, CPABy William J. Winter, CPA


MoneyLife100The Tax Cuts and Jobs Act (TCJA) of 2017 was a major overhaul of the U.S. tax code, and it has taken CPAs and taxpayers by storm. Whether you are filing as an individual or as a business, you likely will see a few changes this year when you file your 2018 federal income tax return.

Tax File FolderIf you are one of the many U.S. taxpayers who wait until the last minute to file your taxes, make sure you are aware of these items that are new for 2018.

1. You may not owe as much as you think. The federal income tax rates and brackets were lowered starting in 2018. Prior to 2018, the graduated tax rates were 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent. For 2018 and beyond, the graduated rates are 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent.

2. The standard deduction has doubled. Filing taxes may now be easier by not having to itemize your expenses. The new standard deduction is as follows:

  • Single and married filing separately: $12,000
  • Married filing jointly: $24,000
  • Heads of household: $18,000

The standard deduction is $1,300 higher for those who are over 65 or blind, and $1,600 higher if also unmarried and not a surviving spouse.

3. Personal and dependent tax exemptions have been eliminated.

4. Individuals who own a small business may qualify to take the new qualified business income deduction. This deduction may end up being worth the time you take out of your busy day to ensure your tax bill is as low as possible. Eligible business owners will get a deduction of up to 20 percent of his/her qualified business income. For example, a qualified business owner who has $50,000 of qualified business income could qualify for a tax deduction of up to $10,000 (20 percent of $50,000).

5. The child tax credit has doubled from $1,000 to $2,000 per eligible dependent child. Additionally, the amount of this credit that is refundable has been increased from $1,100 to $1,400. There is also a new nonrefundable credit of $500 for dependents other than children. The income threshold at which these benefits phase out have been raised from $110,000 for a married couple to $400,000.

6. The Alternative Minimum Tax (AMT) exemptions have increased. The amount of taxable income exempt from the AMT increased from $84,500 to $109,400 for married filing jointly and from $54,300 to $70,300 for single taxpayers.

Make sure to consult with a tax adviser if you need assistance with any of these tips. And don’t forget to file your tax returns by April 15, 2019.


William J. Winter, CPA, is owner of Winter Accounting & Advising LLC in Pittsburgh. He is a 2016 PICPA Young Leader Award winner. He can be reached at will@wintercpas.com.



1 comment

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  • AIDA Vazquez | Apr 05, 2019

    I'm member of the PICPA and wondering if you can provide me information regarding SEP contribution to employees . How much will be the contribution he has to make to employees if he contributes to himself $54,00. A client has business net profit of $532,638 and 50% of the self employment tax is $14,938.

    I really appreciate your help

    Thanks

    Aida

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