Changes in 2018 tax deductions
Curious to see if you will need to file a Schedule A? See where you are at on the spectrum with the 2018 tax changes.
Standard Deduction and Personal Exemptions
The 2018 Tax Reform will expand the standard deduction for individuals to $12,000 and to $24,000 for joint filers. The 2018 tax changes also repeal personal exemptions. To see a side by side comparison chart of new tax brackets click Here
State and Local Tax Deductions
The SALT deduction (State and Local Tax) refers to the taxpayer’s ability to deduct their state income taxes and/ or sales taxes if itemizing deductions. In previous years, there was no limitation on the deduction of state and local taxes, which was an advantage to those living in high tax states like California and New York. The new tax reform limits the SALT deduction to $10,000 which includes income, sales, and property tax.
Mortgage Interest Deductions
The old tax law, the IRS would allow homeowners to deduct mortgage interest on their primary residence and or second home. This allowed owners to itemize a maximum of $1 million in original mortgage principal. The 2018 changes in tax deductions the maximum has been reduced to $750,000 in original mortgage principal. This will go into effect for all new mortgages. Taxpayers with existing mortgages in between $1 million and $750.000 will be grandfathered into the old deduction.
Under the old plan there was an inheritance tax of 40 percent on amounts above $5.49 million for individuals, and $10.98 millions for couples. The new amount is $10 million for individuals with the 2018 tax changes. When indexed for inflation, individuals can pass on $11.2 million. While couples can transfer twice that amount without paying a penny of tax.
If you would like to find out more on how to prepare for the 2018 tax season than, see the benefits in Strategic Tax Planning.