How will the new tax plan affect you? Pull out your 2016 copy to see. If you need to prepare 2016 tax returns email Stephanie at stephanie@paulinestaxservices.com

The estimated date for the new tax plan, should the proposed bill be voted a law, should be around November 23, 2017 before thanksgiving.  I am excited, how about you?  Well,  you may or may not be thrilled depending on how it might impact you personally.  Pull out last years copy for revie, if you have no idea where it is now is a good time to look for it or request a new copy from your tax preparer.  I’ll lay down some basics and suggest the new numbers that you can insert into your own situation. It is some work, and yes, you have a tax professional but understanding how tax planning measures your life is priceless.  

 

  • Tax is calculated on income that has been adjusted for the inclusion of other items. (Taxable income, adjusted adjusted gross income).
  • Tax lingo is specific, so think, logical. Taxes are about reading. Lots of reading. which is why most folks pass the baton to the professional but think about it this way.  The tax professional reads all of the publications and instructions and updates.  The taxpayer (you) reads the 1040. It’s 2 pages.
  • Taxes are about math, lots of calculations.  Example: The tax professional (me) reads each publication for the equation, calculates based on data given, and then inserts answer onto appropriate forms.  The taxpayer (you) must keep a running tally of items you can deduct or need throughout the year and then pass that data on to the professional at the end of the year (tax season).  It’s different math, and different responsibilities but they work in conjunction.1040 EX of new tax plan.jpg

 

One major change I’ve noticed in the  proposed tax plan is the statuses have narrowed to Single or Married Filing Joint. No more Head of household, etc.  I read that there may be a new tax credit of $500 for taxpayers with non child dependents.

The current standard deductions given are shown on the left of the 1040 example in orange highlighter and the new numbers proposed are written in on the right.  Your itemized deductions on the Schedule A must be more than $12,000 (standard deduction) for a single person and more than $24,000 (standard deduction) for married people.

Currently every person listed on a return (including dependents) “gets” $4,050 “exemption” to deduct, but that may be eliminated.   Good news for some folks, though, the Alternative Minimum tax may be eliminated, too.  The Child Tax Credit might be increased.

– So far, known proposed items eliminated are the home office deduction as well as the deduction of prior years’ state and local taxes.

 

Proposed Tax Brackets 2018

Single                                                                                                     Married

$0 – 37,500 ish                                            12%                                  $0 – 75,000

$37,500  – 112,500 ish                               25%                                  $75,000 – 231,500 ish

$112,500 – $415,050 and up                    35%                                 $235,000 – 466,000 and up ish

 

That’s all for now but Ill try to keep you updated as November 23 approaches and then afterwards to prepare for the upcoming due date for tax returns.

 

 

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