If you turn on the news you will find no shortage of opinions about the latest tax bill. If you are like most people you just want the facts so you can figure out the most important question on your mind “What does this mean for ME?”
At the time of writing this, the tax plans are not fully approved and signed into law but we do have an idea of the changes that are being proposed. Here are the major highlights:
Deductions are used to reduce your tax liability and can either be standard or itemized. Standard deductions are a fixed amount while itemized deductions comprise of a list of allowable expenses. The IRS stats show that 70% of tax filers elect for standard deductions.
Standard Deductions will double for both single ($6,350 to $12,000) and joint ($12,700 to $24,000) filers.
Itemized Deductions could potentially see the following changes;
Taxes paid at the state and local level will be limited to property taxes paid up to $10,000.
Mortgage Interest capped– only mortgage interest related to the first $500K in mortgage value will be eligible to be itemized (i.e. if your mortgage is $750K with a 4% interest rate, you will only be able to deduct $500K* 4% = $20,000 as a deduction).
Threshold reduced for medical expenses. Instead of the current 10% threshold, if passed, you will be able to deduct approved medical expenses that add up to an amount greater than 7.5% of your adjusted gross income
Personal exemptions (another reduction to your tax liability) currently at $4,050 per filer and each dependent on your return will go away under the new plan.
Child tax credit doubles to $2,000 per qualified dependent (with some limitations)
Significant changes to the tax brackets:
As more details concerning the final plan are released we will be providing an update so stay tuned. For questions concerning specific situations leave a comment or contact us via the website.