What Are the New Tax Rules for 2019?

The new year is going to bring a lot of shakeups in the world of tax preparation, as 2018 is the first tax year for which the new Tax Cuts and Jobs Act is in effect. The legislation, passed by Congress and signed into law by President Donald Trump in December 2017, features the most widespread tax reforms in more than 30 years, which means that, for many individuals and business owners, the way they prepare and file their taxes is about to be a lot different.

Here’s a brief overview of how some of these changes will affect your tax preparation in Des Moines, IA.

Families with children

The dependent exemption deduction no longer exists as of tax year 2018. Instead, the child tax credit doubled from $1,000 to $2,000, which means families with children might actually see larger tax refunds. The amount that is refundable also grows from $1,100 to $1,400. The new legislation adds in a non-refundable credit of $500 for dependents other than children, and raises the income threshold at which benefits phase out from $110,000 for a married couple to $400,000.

Standard versus itemized deductions

If you previously claimed the standard deduction, you’ll likely have less tax liability in 2018, because the standard deduction amount has doubled. Now single taxpayers have a $12,000 standard deduction, and married couples filing jointly have a $24,000 standard deduction. This means a much smaller number of people will itemize.

If you previously claimed itemized deductions, you’ll have fewer tax deductions to lower your tax liability, because the number of available deductions has decreased. This is especially true in areas with high property taxes, as the new law limits the amount of local property, income and sales taxes you can deduct.

S-corporations, partnerships and self-employed individuals

If you are self-employed or operate a business as a partnership or S-corporation, you might see lower tax liability in the coming year, because the Tax Cuts and Jobs Act included a 20 percent qualified business income deduction for incomes from various types of pass-through entities and nearly doubles how much money small businesses are able to expense when purchasing business equipment (now $1 million).

Ultimately, it can be beneficial to file a new W-4 form with your employer in response to the changes in the new tax law, especially if your personal situation has changed or you began a new job this year. There are going to be a lot of changes to weather during tax season this year, so it’s important you do everything you can to prepare for those changes so you can have a better sense of what’s coming your way before you actually file your tax return.

For more information about the changes brought forth under the Tax Cuts and Jobs Act and the steps you should take as part of your process of tax preparation in Des Moines, IA, we encourage you to contact the expert team at Accounting & Tax Professionals, PLC today with your questions and concerns.

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