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There are a number of provisions in the new law that will lower many individuals’ tax liability for 2018. However, a number of deductions to which we have grown accustomed have gone away. This blog highlights the deductions that will be no longer available or are reduced for 2018 and future years.
By Christopher C. Humes, CPA | Baker Tilly Virchow Krause LLP
It's tax filing season, and while few of the provisions of the Tax Cuts and Jobs Act affect 2017 tax filings, there are a number of provisions that may have a dramatic effect for 2018. Planning for the upcoming year should be integrated with the completion of current year income tax returns.
There are a number of provisions in the new law that will lower many individuals' tax liability for 2018, including lower tax rates, a doubling of the child tax credit for children under 17, and a new credit for nonchild dependents such as children over 17 and elderly parents. In addition, the standard deduction has been nearly doubled from $6,350 to $12,000 for singles, and from $12,700 to $24,000 for married couples filing jointly.
However, a number of deductions to which we have grown accustomed have gone away. This blog highlights the deductions that will be no longer available or reduced for 2018 and future years.
Planning for the upcoming year is critical, and this year's tax filing season is a great time to begin. Many taxpayers will benefit from the increased standard deduction, but those who currently itemize and are in an "in-between" area falling above the 2017 standard deduction but below the new standard deduction need to keep in mind that the increased standard deduction will only lower their taxable income by the difference between the new standard deduction and their current itemized deductions. Taxpayers with children under age 17 need to consider the effect of losing personal exemptions for children with the increase in the child tax credit.
Employees who incur substantial out-of-pocket business expenses (such as traveling salespersons or construction workers who buy their own tools) need to take into account that these expenses will no longer be deductible. Investors who incur investment management fees will no longer be able to deduct these fees. Homeowners and higher-income taxpayers may see their deductions for state and local taxes are reduced.
With all the changes in store for next tax filing season, planning should start now to avoid unexpected surprises. It is important to keep in mind that the objective should be to pay the proper amount of tax and to have the correct amount of tax withheld or paid via quarterly estimates.
Consider asking your tax professional to run calculations using your current situation and what-if scenarios that take into account your unique situation. I strongly urge you to work with a qualified tax professional to assist with your tax planning for the coming year and future years as part of a comprehensive financial plan.
Christopher C. Humes, CPA, is a senior manager at Baker Tilly Virchow Krause LLP. He is a PICPA member and serves on the CPA Image Enhancement Committee.