LOUISVILLE, Ky. — It’s that dreaded time of year…tax filing season. Before you rush to pick up your pen and start your tax returns, there are some new changes you need to know about. This is the first year filing under the tax overhaul passed in 2017.
A poll from personal finance website NerdWallet shows 28% of Americans are still unsure of what the Tax Cuts and Jobs Act of 2017 actually changed. As taxpayers begin to prepare their W-2 statements for the 2018 tax year, NerdWallet’s poll also showed 48% of those who took it don’t understand how the tax law affects their tax bracket either.
One of the biggest changes under the new tax code is standard deductions. They’ve doubled, meaning that for single filers, the standard deduction is now $12,000. For those filing jointly in a marriage, the standard deduction is $24,000.
"Let’s say a single person, for instance, their standard deduction this year is $12,000. So they have to have over and above $12,000 in order to even do long-form anymore,” Christy Willis said. Willis is the office manager at tax services Jackson Hewitt. “People have always been able to do long-form in the past, or a schedule A in the past, well now this year with the higher amounts, you’re not going to have to. Which is beneficial to some people, but then some people if they don’t have enough, then they’re going to get that higher amount anyway.”
The new tax law has also done away with personal and dependent exemptions. They used to be $4,050 for yourself, your spouse, and each child. But Willis said there is still some confusion about whether or not you can still claim your child.
"They think because you don't get that exemption amount anymore that you can't claim your kids. That's not the case, you still claim your kids accordingly on the return as you would any other time, you just don't get that extra $4,050 exemption anymore,” Willis said. “If they’re claiming dependence on their return where they think they don’t get anything for their kids anymore, they still get that child tax credit which went from $1,000 a child to $2,000 a child this year. Then, if you don’t get it all at the top as a child tax credit, you get the rest of it at the bottom as an additional. But the most you can get down there is $1,4000 a kid so that has helped people’s refunds as well.”
Itemized deductions are expected to go down this year, meaning you'll lose the ability to deduct for a number of expenses now like home mortgage interest, moving or job expenses, and tax prep, among others.
"Because they're giving it to you pretty much in your standard deduction amount. So they took that away from us, and they gave you more off the top,” Willis said.
Also, don't forget to keep an eye out to your tax bracket. Those changed for a number of people this year. There is also some good news for your tax returns this year.
“The biggest thing is it’s giving people bigger refunds,” Willis said. "Everybody at first was kind of negative about it at first, but I've seen it to where it's been very beneficial to everyone so far this year."
Many people might find they're actually owing less this year and getting more back from their tax returns.
Tax services are also recommending you get your taxes filed earlier rather than later, especially this year. With the partial government shutdown and the possibility of the shutdown continuing again, it’s still unclear how that might affect the IRS. Plus, with all of the changes, you want to leave yourself enough time to get things clarified.