The 2017 tax season has come around and concluded with an intriguing set of reminders of what’s to come in the future with the new tax reform bill. It has been a unique one and something that has brought with it an intricate list of regulations.
The IRS worked on adding to its security measures and even took the opportunity to improve filing procedures using modern software providers. They were able to establish new deadlines that would make it simpler to maximize K-1s from publicly traded partnerships and make sure it was done well in advance. This was done to ensure extensions were not being filed. In addition, the government didn’t move forward with significant tax code changes and kept things simple under the Affordable Care Act tax provisions.
While all of it seemed to play out nicely, a lot of these nuances had an impact on how the April deadline was met. This brought along with it a unique set of challenges that had to be navigated, understood, and overcome as soon as possible. The tax, accounting and financial services industry continues to grow and this was seen in the implementation of technology into every little step. It is not just what financial service firms are doing but what the average client expects in this day and age. It is all about using modern technology and understanding its use too.
Rise in Activity
The IRS made an implementation of new deadlines that meant there was a flurry of activity starting in the end of February and concluding in the middle of March. This made the processing of data important for all taxpayers as it had to be done on time. There were assumptions made about the IRS holding period and specific tax credits that would be left to February 16th. This meant people were willing to push things to the end.
In the end, the tax season has been a unique one and has brought along with a great deal of information as everything moves into a tech-friendly phase. For those prepping and looking ahead to the 2018 tax season, it’s time to think about the details associated with it and how things will change compared to 2017.
What’s To Come in 2018
2018 is going to be a whole different ball game and numerous changes are being implemented by the US government. These changes have to be incorporated into what is being done at all levels. Whether it is big corporations or individuals aiming to file their taxes on time, this information will be useful. It is important to note down these changes as soon as possible to be aware of them throughout the year. Having this information on hand can make the difference in missing deadlines and/or not maximizing your tax benefits down the road in 2018.
Here are the most important 2018 tax changes for individuals and small business owners
1) Estate Tax
According to the IRS, there will be a change to the estate tax regulations. In 2018, the estate exemptions are going to be set to $11.2 million (per individual) and are going to sit at $22.4 million (per couple). These changes are going to be seen effective immediately and should be on the minds of those that will be filing for these. It is essential to speak to a qualified CPA as soon as possible to get a gist of how this tax season is going to transpire and what it is going to hold for the estate.
2) Child Tax Credit
For those receiving child tax credits, there are going to be noticeable changes based on the child’s age bracket. For example, it is going to be raised to $2,000 (per child) as long as the child qualifies. This is going to go up to the age of 17 and is going to be increased from $1,000 as seen in 2017.
In addition, there is going to be a new credit added to the dependents that are unable to hit this $2,000 mark. The new credit will be set at $500. All information will be made available by the IRS and can be received via a qualified CPA.
3) Standard Deductions
While individuals are going to have a unique set of regulations, anyone that is married and/or filing jointly will see a rising deduction of $24,000. This is going to be increased from 2017, where the standard deduction for couples was set at $13,000.
In addition, anyone that is single and/or is married but filing on his/her own, the standard deduction is going to be established at $12,000. This is going to be increased from 2017, where the standard deduction for single taxpayers was set at $6,500.
Another regulation that has been set by the IRS would be the standard deduction for “heads of households” as it will now be $18,000. In 2017, this was set at $9,550.
4) Mortgage Interest
For individuals with an approved mortgage under their name, there is a deduction set up on the interest that is paid. This is going to be set at $750,000 for 2018 and is going to depend on the specific mortgage loan balance that has been declared. It would have to be declared by December 15th.
The limit itself would be set at $1,000,000 on all mortgages if they were established/declared before December 15th, 2017.
5) State and Local Taxes
For all state and local taxes in 2018, the itemized deduction is going to be set at $10,000 depending on the property/income taxes paid in that year.
6) Contribution Limits for Retirement Savings
If an employee is looking to participate in specific retirement plans such as the 401(k), 457, 403(b), and Thrift Savings plan then there will be an increasing contribution limit of $18,500. This is a $500 increase from 2017.
7) Savings in IRAs
The final change will be set for individual retirement accounts that are in the higher income tax bracket. This will include a set amount for single taxpayers at $63,000 instead of $73,000. Married couples are also going to see a change as a contributor to their workplace retirement plan. It is going to be sitting in the $101,000-$121,000 range. If there is no retirement plan then it is going to sit at $189,000-$199,000.
Please note, these “phaseout” changes will not include married individuals that file separate returns. They have a separate range of $0-$10,000.