26 Jan The Tax Man Cometh
Surprise surprise, it’s the end of the year!
Time to address everyone’s favorite subject:
Or more specifically, Public Law no. 115-97 “The Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.”
Unless you’ve been living under a rock (which I wouldn’t blame you for) you know that the tax reform bill is now law. Taxes are the #1 expense in your entire life, MORE than food or shelter. So it pays to pay attention here. Here are a few changes that you might want to be aware of.
1. You will probably pay less. – With the standard deductions doubling and some of the tax brackets shifting, it’s quite possible you will pay fewer taxes for 2018. The IRS is set to clarify the new withholding tables sometime in January. So, in February you can choose to change your withholdings so you don’t end up overpaying. Just ask your employer for a new W4 form if they don’t already offer it to you on an annual basis.
2. If you’re self-employed in any way, you will almost certainly pay less on that income. – If your business is a sole-proprietorship, a partnership, an LLC or an S-Corp, the income you peel off from your business is “pass-through income”. You will now be able to deduct 20% of that income right off the top. Nice right? But of course, it’s not quite that simple for everyone. There are a bunch of if/and’s/but’s in there. This article was helpful in breaking it all down in plain English! https://www.greenbushfinancial.com/pass-income-will-taxes-2018-small-business-owners/
3. Child tax credits will double – These credits will shift from $1,000 per kid under 17 to $2,000. (Nice timing little Olson girl/boy). The income-based phase out for this is also shifting up from $110,000/couple to $400,000.
4. No more “individual mandate” – The penalty for not having health insurance is dead. It’s assumed that many of the lower-risk people who bought into the exchange because of the penalty will hop back out. So, many of the people who do not get insurance through employers could have their premiums spike as a result. We shall see.
5. Mortgage deductions are changing. – I have heard a lot of people worrying about this . But they probably shouldn’t. Mortgage interest deductions are already capped at loans of $1 million. All they’re doing is sliding that down to $750,000 for all newly purchased first and second homes. Unless you’re planning on borrowing more than $750,000 for a mortgage sometime after 2017, don’t worry about it. And even if you ARE, it’s still not that big a deal.
There are obviously many more changes than the ones I listed here. Here’s a great breakdown of more of them. https://www.bloomberg.com/graphics/2017-republican-tax-proposal/ Whether this tax bill ends up being “good” or “bad” for the country, I’ll leave that to you to decide. I at least just want you to be informed on the basic facts. Please don’t take what you see on Facebook as gospel about this stuff. Do your own reading then talk to your CPA and financial planner about how this could be affecting you starting next year.