How Does the New Trump Tax Plan Effect You?

September 28, 2018

When President Trump signed the Tax Cuts and Jobs Act into law, it called for sweeping tax law changes. The way it affects you depends upon your existing filing status along with your income and the deductions you take. Here are some highlights of the primary features of the new federal effective tax rates.

Still Seven Tax Brackets

The initial plan had reduced the seven tax brackets to four. Although somewhat altered, there are still seven. The new largest tax rate is 37%, versus the previous 39.6% and applies to taxpayers filing with a “single” status with an income threshold of $500,000. It also applies to those who use the “married filing jointly” status and earn over $600,000.  

Increased Standard Deductions

Encino tax consultants can help you decipher the changes are coming, regardless of whether you itemize or choose the standard deduction. Since the standard deduction almost doubles the previous threshold, itemization may no longer be required for you to gain a benefit.

Additional Notable Changes

• Local and State Taxes – For the 2017 federal tax returns, writing-off local and state taxes, prevent double taxation. You can also deduct general sales and property tax payments. The deductions are still available starting in 2018, but they are capped.  An Encino accountant can help you get the most from the new changes.

• Mortgage Interest Deductions – The new tax policy limits the deduction up to $750,000. Current homeowners are not affected by the cap, just future buyers.

• Child Care Tax Credit – Thee Trump tax plan increases the credit to $2,000 per child for children under 17 and raises the earning cap. The adoption credit is still worth around $13,750 per child.

• Estate Tax Deduction – The Trump tax strategy doubles the real estate tax deduction. Now wealthy households can transfer more tax-free funds to their heirs.  

Filing taxes can be confusing, and the TCJA can impact the amount you owe by thousands of dollars. Contact us for help wading through the new tax law and find the tax plan that’s right for you.

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