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- Tax Day 2019 is April 15. It is the last day to file your 2018 tax return.
- This is the first tax season since the new tax law went into effect, the most significant change to the US tax code in 30 years.
- Taxpayers can expect to see an increased standard deduction and child tax credit when filing their tax return, while other deductions have been eliminated or capped.
- Most taxpayers can file their tax return online using services like TurboTax, H&R Block, Liberty Tax, and TaxAct.
In 2017, the US government passed a major tax law that went into effect for the 2018 tax year. That means that the law’s changes will hit your wallet when you file your tax return before Tax Day on April 15, 2019.
Let’s take a look at some of the biggest changes you can expect on your tax return when you file this year.
New tax brackets
The first thing you’ll probably notice is that the tax brackets have been adjusted. There are still seven federal income tax brackets — but at slightly lower rates and adjusted income ranges.
Remember that tax brackets are graduated. That means you’ll pay 10% on the first $9,525 you earn if single or $19,050 if married filing jointly regardless of whether you make $9,000 per year or $9 million. As your income goes up, you only pay the higher rate on the new income. Rates don’t go up retroactively on all of your income.
Higher standard deduction
When filing taxes, you can choose between taking the standard deduction or itemizing your deductions. After adding up all of your allowed itemized deductions, if the total is larger than the standard deduction, you can deduct that from your income.
This year, the standard deduction is about double compared to prior years. When combined with some reduced, capped, or eliminated deductions, it may convert you from an itemized household to a standard deduction household when you file in 2019. That could simplify things for many people.
A bigger Child Tax Credit
In 2017, the Child Tax Credit was $1,000 per child. A credit lowers your tax bill directly where a deduction lowers your taxable income. This means credits have a bigger impact on your tax bill than deductions.
Starting in 2018, you can deduct $2,000 per child. Income limits apply, but they are significantly higher than they were in 2017.
No more exemptions
While the standard deduction increased along with the Child Tax Credit, personal exemptions are now a thing of the past. Prior to 2018, there was a personal exemption of $4,050 for each filer, spouse, and dependent.
Limited state and local tax deduction
Anyone who owns a home in a state with high state taxes, which includes California, New York, New Jersey, and Illinois, will see the beloved SALT deduction capped at $10,000 for 2018.
SALT stands for state and local taxes, an allowed deduction under both the old and the new tax rules. But starting with the 2018 tax year, you can’t claim the full cost of state and local taxes — including property taxes — if they are more than $10,000 per year.
Get a jump start to avoid last-minute stress
It’s never too early to start planning and getting ready for tax time. That means gathering statements and documents, knowing what to look for in the mail (and email) when important documents arrive, and planning how you will file in 2019.
Whatever you do, don’t wait for the last minute. That is a fast track to stress, mistakes, and other issues down the road. When you are well prepared, you can file your taxes with ease through your favorite accountant or tax app.
Most people do just fine preparing their own taxes using an online app like TurboTax, TaxAct, H&R Block Online, or Liberty Tax. Others feel more comfortable with a professional accountant. In either case, get ready for some big changes when you prepare your 2018 tax return.
Read more of our Tax Day 2019 coverage
- How to figure out if you should do your own taxes or hire a pro
- The deadline to file your taxes is April 15 in every state except Maine and Massachusetts
- Everything you should be doing to prepare for tax season
- Tax Day is April 15 — here’s what you can expect when filing under the new tax law
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Source: Business Insider