I’ve mentioned a few times before, but if you’re new here, one of my part-time jobs is with a tax prep company (similar to TurboTax, but better ;)). I wrote a post last year with tax tips for bloggers and small business owners that lots of people found helpful. And while I normally don’t spend too much time writing about taxes and tax law on here *boring*, I did want to share some of the tax updates that you’ll see when you file your tax return in 2019.
Thanks to the Tax Cuts and Jobs Act that President Trump passed in 2017, there are some major tax changes for 2019, but I’ll share the majority of them below so you’re not too surprised come April!
Changes to Form 1040
Form 1040 has had some major changes. Instead of one Form 1040 with 2 pages, it’s now turned into Form 1040 and Schedules 1 through 6. There are no more forms 1040A or 1040EZ. Here is what’s now found on the form 1040 and the corresponding schedules:
-Form 1040: Personal Information, Dependents, Paid Preparer
-Schedule 1: Additional Income and Adjustments to Income
-Schedule 2: Tax
-Schedule 3: Nonrefundable Credits
-Schedule 4: Other Taxes
-Schedule 5: Other Payments and Refundable Credits
-Schedule 6: Foreign Address and Third Party Designee”
Changes to the 2018 Tax Tables
There will be significant changes to the tax rate on your 2018 tax return. While there are still 7 tax brackets, the rates are lower than they were in 2017. Here’s a look at what they will be on your 2018 return:
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Married Filing Jointly or Qualifying Widow (Widower)
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Married Filing Separately
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Head of Household
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Changes to Personal Exemptions
Personal exemptions are repealed on the 2018 tax return. This means that you won’t see an amount listed on your form 1040 in increments of $4000 for the number of people you’re claiming on your return. But that’s made up in the…
Changes to the Standard Deduction
The standard deduction for each filing status is doubled for 2018. What this means is it may be more beneficial for you to take the standard deduction on your 2018 return, when you’ve normally itemized in years past. Here are the standard deductions for each filing status so you can get an idea of how much your itemized deductions would need to be to take the itemized deduction on your return:
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Changes to the Child Tax Credit/Dependent Credit
The Child Tax Credit is one that most parents hope to get on their tax return every year. Here are how the requirements will change for 2018:
Child tax credit (CTC) – The total credit has changed from $1,000 to $2,000. Your child must have an SSN and be 16 or younger to qualify.
Additional child tax credit (ACTC) – The total credit has changed from $1,000 to $1,400. Your child must have an SSN to qualify.
Credit for Other Dependents (ODC) – $500 non-refundable credit and dependent can have ITIN or SSN. The credit will begin to phase out when AGI is $200,000 or $400,000 for joint filers. In 2017 the phaseout was $75,000/$110,000.
Changes to Moving Expenses
On your 2018 return, the moving expenses deduction is only for active duty military that are required to move.
New Qualified Business Income Deduction
This is a new deduction this year for those who enter business income on their return. YAY! The deduction is for up to 20% of qualified business income (QBI) for K-1s and sole proprietorships.
Changes to Business Interest
Business interest will be limited to the sum of:
1) business interest income
2) 30% of the taxpayer’s AGI
3) the taxpayer’s floor plan financing interest
This can be carried forward to future years.
Changes to Depreciation
The maximum deduction for depreciation has increased from $500k to $1 million. The phaseout for depreciation has also increased. However, now, computer or peripheral equipment is no longer listed property.
Changes to Alimony
This is a big change for those who will get divorced. The change applies to divorces executed/modified in 2019 and after. For those couples, alimony won’t be deductible by the payer and won’t be included in gross income for the recipient.
Changes to Unreimbursed Job Expenses
Employee job expenses are no longer an eligible itemized deduction unless you are Armed forces reservist, qualified performing artist, fee-based state or local government official, or an employee with impairment-related work expenses. These items are now considered an adjustment and are reported on Schedule 1 instead of an itemized deduction on Schedule A.
Changes to State and Local Income Tax
There is a cap of $10,000 (for Married Filing Jointly/Single/Head Of Household/Qualifying Widow) and $5,000 (Married Filing Separately) for the state & local income tax itemized deduction.
Changes to Charitable Donations
Charitable contributions are limited to 60% of AGI instead of 50%; still 50% for noncash donations.
Changes to 2% of AGI deductions
Items like job expenses for most people, tax preparation fees, misc investment expenses, etc. can no longer be deducted on your tax return.
I hope this post about 2018 tax law changes prepares you for filing your tax return this year! Several things have changed with the tax law, but hopefully, my tax reform summary will lessen the shock come April 😉
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