Whenever there is major tax reform, the question on everyone’s mind is, “Will my taxes go up, down, or stay the same? We will try to help you gain insight into what bearing the tax code changes effective in 2018 will have on your personal tax situation.
This is the first article in our spring blog series that addresses the recent tax reform bill known as the Tax Cuts and Jobs Act. This legislation impacts both corporations and individuals. The changes for corporations are permanent while the changes for individuals are subject to a sunset provision after 2025.
Corporations will pay a single tax rate of 21%, down from a high of 39%, while individuals will see their tax brackets reduced by a few percentage points with a top rate of 37%. The seven tax brackets for both single taxpayers and married taxpayers filing jointly are listed below. Taxable income is listed on line 43 of IRS Form 1040 and on line 27 of IRS Form 1040A.
One of the most significant changes individual taxpayers will see in 2018 is the substantial increase in the standard deduction. In 2017 the standard deduction for single filers was $6,350 and $12,700 for married couples filing jointly. In 2018 the standard deduction for single filers is $12,000 and $24,000 for married couples filing jointly. This increase in the standard deduction will make filing easier for many taxpayers who in the past had itemized deductions on Schedule A.
Please stay tuned to our blog as we address several specific areas of the new tax legislation in the upcoming posts. These will include itemized deduction changes, the expanded child tax credit, changes to 529 savings plans, expanded charitable contribution limits, and changes to business tax law.