Will the New Tax Cuts and Jobs Act Affect My 2017 Tax Return?

With the passage of the latest tax reform law: “Tax Cuts and Jobs Act,” you’re probably curious if this has an impact on your 2017 tax returns.

With the passage of the latest tax reform law: “Tax Cuts and Jobs Act,” you’re probably curious if this has an impact on your 2017 tax returns. The short answer is NO.

It will take some time for the Internal Revenue Service to implement changes to the current tax system, so this law won’t change how you do your tax returns until you file for 2018 in April 2019.

Whew…that’s a relief, right? However, you may see changes in your 2018 taxes as soon as your first paycheck in February. Below we list a few of the bigger changes you should be aware of.

Lower Tax Rates!

The new tax reform law reduces the tax rates for many individuals, families and businesses. Because of this, less will be pulled out of your paycheck for federal withholdings. There will also be new guidelines for businesses coming from the IRS for federal withholding practices. The income brackets have also changed for single filers and joint filers, so be sure to see where you fall on this.

A chart on this can be found here from the Forbes.

Elimination of Personal and Dependent Exemptions

On the other end, the new law eliminates the personal and dependent exemptions which was expected to be a deduction of $4,150 in 2018. This will help to balance some of the offsets created by the current tax cuts and should be accounted for in filing independent and joint returns in 2019.

Increased Child Tax Credit

The new tax law has also increased the child tax credit from $1,000 to 2,000, which is a big relief for families. Head of households can use this tax credit if they’re a married couple making less than $400,000 annually.

There’s also a non-refundable credit of $500 for families that have dependents that are not children. This will help you for expenses dedicated to elder care or adults in your care who can’t support themselves due to injury, age, or disability.

New Limit on State & Local Tax Deductions

As a business, individual or family, you should know that there’s now a limit on how much can be deducted from your state and local taxes. It’s now down to only $10,000 which will definitely affect you if you’re in a high-tax state like New York or California.

It’s best to figure this into your future tax return as this may affect the amount of your refund compared to earners in other states.

Corporate Tax Rate of 21%

Small businesses and corporations are going to see the biggest benefit from this new tax reform law. The corporate tax has been cut down to only 21%. So, you’ll have a tax break in 2019 when you file your 2018 tax returns!

The Standard Deduction Doubles

And finally, everyone can greatly simplify their tax forms with the new standard deduction. It went up from roughly $6,000 to $12,000 for individuals, and it went from $12,700 to $24,000 for joint filers. This makes filing taxes much easier for those who rarely if ever perform itemized deductions.

This means you can maximize your deductions as a standard earner just through the standard deduction alone!

Still Confused…?

If so, get in contact with your CPA or EA. They can further break down what this means for you and your 2018 tax return. And you have an entire year to figure it all out, so no immediate rush.

Search our extensive and qualified CPA database to find more information from a tax consultant who can help!

About the Author

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Joseph A. Davis, EA, CDFA®BFA™

Director

With over 16 years in the financial services industry, Joe knows his stuff. Cursed with the desire to be a serial entrepreneur - Joe is a real estate investor & managing partner for Davis Financial LLC, Utah Divorce Services and Davis Tax & Associates. He most recently became the director for Find a CPA Today. Joe is an Enrolled Agent, EA, & CDFA®, BFA™. He also holds FINRA licenses 7, 66 & 24. When Joe isn't trading, looking for new real estate investments or obsessing over his work - you can find him at home, playing with his children & probably mowing his lawn.

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