Tax Time: How will the new laws for filing income taxes affect me?

Tax Time: How will the new laws for filing income taxes affect me?
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It’s tax time – again! And with the first major overhaul of the tax code in more than 30 years underway, many Americans are wondering: Will this affect the taxes I pay in 2018 for the 2017 tax year? The answer is no.

While the new tax bill (in effect starting January 1, 2018) will apply to income earned this year, you’ll still file your 2017 taxes using the previous income tax brackets and laws – with a few exceptions.

With more than 500 pages of changes to the tax codes, the tax reform will affect nearly everyone at every tax bracket for the 2018 and subsequent tax years.

Changes That Will Affect This Year’s Taxes

Several changes could affect your 2017 and even your 2016 taxes, including how you pay your state and local taxes and expense certain property for your business.

Those with significant medical expenses will also need to take note of new changes. For instance, if you currently itemize your deductions, you’ve previously been able to deduct qualifying medical expenses that exceed 10 percent of your adjusted gross income. The new bill only allows medical expense deductions that exceed 7.5 percent of your adjusted gross income.

Changes in personal casualty losses date back as far as 2016, and were recently expanded to include losses in any federally declared disaster areas, including the Mississippi River Delta Flood Disaster Areas.

While there are changes in the new tax bill that affect everyone, there are also changes that only affect specific filing groups.

Tax Brackets: Single Filers

The seven tax brackets will remain the same, but the income ranges for each have changed. For instance, single filers with a taxable income between $37,951 and $91,900 will pay a 25 percent federal income tax for the 2017 tax year. The new tax law provides that anyone with a taxable income in 2018 between $38,701 and $82,500 will pay a 22 percent federal income tax, and those with a taxable income in 2018 between $82,501 and $157,500 will pay a 24 percent federal income tax.

And while the standard deduction has increased from $6,350 in 2017 to $12,000 in 2018, the personal exemption, which was $4,050 for the 2017 tax year, has been eliminated for the 2018 and subsequent tax years.

Tax Brackets: Joint Filers

There are new ranges for joint filers as well. For example, married taxpayers filing jointly for the 2017 tax year with a taxable income between $75,901 and $153,100 will pay a 25 percent federal income tax. The new law widens the range a bit providing that couples with a taxable income between $77,401 and $165,000 will pay a 22 percent federal income tax for the 2018 and subsequent tax years.

The standard deduction for joint filers for the 2017 tax year is $12,700, and will be $24,000 for the 2018 tax year. The $8,100 personal exemption for 2017 has been eliminated for 2018.

Child Tax Credits

For the 2018 tax year, the child tax credit will increase to $2,000 for children under 17 years of age. High earners will also be able to take advantage of the child tax credit, as the bill raises the income threshold. Single parents with incomes of up to $200,000 and married couples with combined income of up to $400,000 will now be able to take advantage.

Health Insurance

The new bill eliminates the mandate to buy health insurance, so there will no longer be a penalty for not buying it.

Estate Planning

Those with a large estate or significant wealth will reap substantial benefits from the recent tax reform; the estate, gift, and generation-skipping transfer tax exemptions have been doubled. With the new law, an individual can pass on approximately $11.18 million during their lifetime or at their death free of taxes. For married couples, the number is about $22.36 million.

While the recent reform may have you reeling in projected numbers and calculations, the IRS’s Resources For Tax Law Changes can help you sort out the math.

For more information on how the new tax law will affect you, your family or your business, visit the Regions Tax Center to help jumpstart your 2018 taxes.

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This information is general in nature and is not intended to be legal, tax, or financial advice. Although Regions believes this information to be accurate, it cannot ensure that it will remain up to date. Statements or opinions of individuals referenced herein are their own—not Regions'. Consult an appropriate professional concerning your specific situation and irs.gov for current tax rules. Regions, the Regions logo, and the LifeGreen bike are registered trademarks of Regions Bank. The LifeGreen color is a trademark of Regions Bank.