Before you start filing your income tax return, there are some key changes you need to know about. Financial experts say the Tax Reform Act of 2017 is the most significant set of changes to the U.S. Tax Code in decades.
Even though the tax reform bill was passed in 2017, it didn’t apply to the taxes you filed last year. When you file this year, you’ll see the difference. You probably even noticed less money being withheld from your paychecks this year as a result of the changes.
Over the next two and a half months, nearly 3,000 people will use H&R Block’s services just at the facility in Oak Ridge, due to significant changes this year following the 2017 Tax Cut and Jobs Act.
“So the good thing is there is no longer a 1040 EZ, a 1040A, and a 1040. It is now just two pages. The first page of the 1040 and the second page,” said senior tax specialist Brandi Selvidge.
According to tax experts, there are a few differences in the new federal tax code: You’ll see changes to the tax rate, medical deductions, alimony payments and child tax credits.
“The additional child tax credit has increased from $1,000 last year for children under the age of 17 to $2,000. And $1,400 of that is refundable,” Selvidge said.
While credits for kids have increased so have individual standard deductions for singles and married couples.
“It has nearly doubled. Last year if you were single, your standard deduction would have been $6,300 and this year it will be $12,000,” said Selvidge. “Married filing joint last year would have been $12,000. This year it is $24,000.”
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The tax tables for standard deductions — married couples filing jointly and single taxpayers — have changed as well.
“Most individual income tax rates have lowered,” said Selvidge. “Last year at the end of February, employers started using the updated IRS withholding tables. So, people were seeing more in their paychecks throughout the year. So, those who did not change their W-4, might be surprised when their refund is smaller. Because they’ve seen the benefit of the tax reform throughout the year in their paycheck.”
Selvidge also explained a big change with the Affordable Care Act.
“There is no longer a penalty for not carrying insurance,” she said.
The threshold to deduct medical expenses temporarily fell from 10 percent to 7.5 percent, which helps people who have a lot of medical bills.
For people in the process of getting a divorce, 2018 is the last year that alimony payments can be deducted from their taxes.
“The tax reform was made to make things simpler, but it’s the biggest change we’ve had in the tax industry in 30 years So, you’re going to need some help figuring out what it means to you personally,” Selvidge said.
Many tax breaks survived the tax reform unscathed, including capital gains and qualified dividend taxes, the child and dependent care credit, the American opportunity credit, the lifetime learning credit, the student loan interest deduction, and tax deductions for retirement savings.
There are also no more breaks for moving expenses except for certain military men and women.