What are the biggest changes in the new tax law?
INDIANAPOLIS (WISH) — Tax experts say the new tax law has led to plenty of changes on how you file taxes. Many of the changes won’t affect you until next year, but there are things you need to know now.
It’s intended to help keep more money in your pocket and take less time to fill out. Want to read it? You can. It’s more than 1,000 pages though.
To save you the time we narrowed it down to some highlights.
The one you may notice first: the tax brackets are changing.
“A large number of taxpayers will pay lower tax because they will have more of their taxable income hitting those lower tax brackets,” said David Winters, who is the director of tax for Simons Bitzer & Associates, which is a CPA firm in Indianapolis.
Here’s what the tax brackets used to be for married couples.
- For taxable incomes up to $18,650: 10 percent
- For taxable incomes from $18,651-75,900: 15 percent
- For taxable incomes from $75,901-153,100: 25 percent
- For taxable incomes from $153,101-233,350: 28 percent
- For taxable incomes from $233,351-416,700: 33 percent
- For taxable incomes from $416,701-470,700: 35 percent
- For taxable incomes above $470,700: 39.6 percent
The new brackets are as follows for married couples:
- For taxable incomes up to $19,050: 10 percent
- For taxable incomes from $19,051-77,400: 12 percent
- For taxable incomes from $77,401-165,000: 22 percent
- For taxable incomes from $165,001-315,000: 24 percent
- For taxable incomes from $315,001-400,000: 32 percent
- For taxable incomes from $400,001-600,000: 35 percent
- For taxable incomes above 600,000: 37 percent
Just based on the change in tax brackets, 24-Hour News 8 calculated savings to be as follows for married couples:
- $18,000 taxable income: $0 in savings
- $60,000 taxable income: $1,800 in savings
- $100,000 taxable income: $3,000 in savings
- $200,000 taxable income: $8,000 in savings
- $350,000 taxable income: $3,500 in savings
- $450,000 taxable income: $0 in savings
- $1,000,000 taxable income: $26,000 in savings
Another change is the doubling of the standard deduction. That is a flat rate you remove from your taxable income.
This new tax law doubles that amount for individuals and married couples.
Now, a couple can take off $24,000 off their income, instead of $12,000. If you file your taxes as an individual, the new number is $12,000. It used to be $6,000.
“A lot of taxpayers won’t have to itemize and take that time and have to track all that information,” said Winters.
At the same time, personal exemptions are pretty much gone. The $4,000 you used to deduct for every member of your household is no more.
“So for a family of four they would get that $16,000 worth of deductions and in 2018, those are completely eliminated,” said Chad Halstead, a partner at Katz, Sapper & Miller, a CPA and tax firm in Indianapolis.
Another change is that the limit is now $10,000 on what you can deduct on your state and local property, income and sales taxes.
Tax experts say that could impact upper-middle class Hoosiers.
“The deduction will be limited and I don’t know how else to say it but there’s nothing you can do right, it’ll be gone,” said Halstead, when asked if people can do anything to avoid the change.
These are some of the larger changes you can expect thanks to the new law. In the coming weeks, 24-Hour News 8 will break these changes down even further, and delve deeper into this new tax law, so you are prepared to file your taxes.We’re examining the new tax law every Monday this month. Got a question for Eric?APP USERS: Click here to send your questions