The news has been swirling with the new tax reform and it seems to be all anyone is talking about. While it may seem complicated, the new tax reform can be broken down into a few main highlights. So what should you know about the new tax reform?
- Income Tax Brackets Have Changed
- The Standard Deduction Has Doubled
- The Healthcare Mandate Has Been Abolished
Income Tax Brackets Have Changed
The income tax bracket you fall into is entirely dependent on your gross income for the year. If you make less money, you have always paid less in income tax than someone who makes more. For example, in 2017, if you made $50,000 per year you paid a roughly 25% income tax. Now, in 2018, if you make that same $50,000, you only pay a 22% income tax. Feel free to check out the latest tax brackets for all income levels.
The Standard Deduction Has Doubled
When you go to file taxes, there are certain things that can be deducted from your total taxable income. These include things like charitable donations as well as interest on your mortgage payment. If these deductible expenses are greater than the standard deduction, it is in your best benefit to itemize your receipts for the year. The standard deduction has doubled under the new tax reform however so this is something to strongly consider. The standard deduction used to be $6,000 for individuals and $12,000 for married couples. This now doubles to $12,000 for individuals and $24,000 for married couples. Luckily, if you’re still unsure of whether or not you should be using the standard deduction or itemizing your tax returns, there are a ton of tax preparation tools out there such as Taxfyle which make the process as painless as possible.
The Healthcare Mandate Has Been Abolished
One of the biggest controversies of the new tax reform law is that it now fully abolishes the healthcare mandate that was previously in place under the Affordable Care Act (ACA). There used to be a fine associated with not having any form of healthcare that was assessed on your annual tax return. Now, there will be no fine as people are free to choose whether to be covered or not.
Every individual’s tax situation is different. The tax reform certainly affected some citizens more than others. The key is to understand how the reform affected your specific situation and to seek the help of professionals who can maximize your return.