With so many changes to the new tax laws, not only in Colorado, but all across the nation, while the new laws do not apply to your 2017 taxes, there is no better time to obtain accounting services, so you will be prepared for next year’s filing. This way you can stay one step ahead of the changes and possibly avoid paying taxes when next year’s season arrives. The new laws could also affect how you spend your money this year, particularly when it comes to such factors as itemized vs. standard deductions.
Since the new tax law is over 500 pages long, here are a few of the key changes to know about:
Standard deduction – for your 2018 taxes, the standard deduction has nearly doubled, from $6350 to $12,000 for a single person, and, from $1270 to $24,000 for a married couple filing jointly, as well as from $9350 to $18,000 for a head of household. This might be great news for those desiring to take advantage of the standard deduction, but could be bad news for those hoping to itemize their deductions, since the amount to exceed has been increased.
Itemized deductions – For those who have obtained “acquisition indebtedness,” otherwise known as the amount owed on the purchase of an existing home or on any existing property improvements or new construction, only the interest on the first $750,000 ($375,000 if married filing separately) is deductible and the purchase must be on or after December 16, 2017. For those who acquired a loan on or before December 15, 2017, the one-million-dollar limit ($500,000 if married filing separately) applies. State/local/foreign property tax and income tax deductions remain the same with the total deduction limited to $10,000 ($5,000 if married filing separately) per year.
Medical expenses – 7.5% rather than the former 10% of your adjusted gross income is now the threshold for yearly deductions.
Personal casualty losses – deductions for those who have suffered losses as the result of a fire, storm or theft are no longer available, unless the disaster is the result of a federally declared disaster.
Personal exemptions – currently an individual exemption is $4050, while the exemption for a couple is $8100. However, with the new tax law, this exemption has been eliminated.
Child tax credit – the new tax law raises the child tax credit from the current $1,000 to $2,000, while the income phaseout has been raised from $75,000 for singles to $300,000, and from $110,000 for joint filers to $400,000.
Property tax deduction: The property tax deduction is now capped at $10,000.
For household incomes of more than $1 million dollars, the tax is 39.6%.
For household incomes of from $260 thousand to $1 million, the tax is 35%.
For household incomes of from $90,000 to $260,000, the tax 25%.
For household incomes of from $24,000 to $90,000, the tax is 12%.
No tax will be charge on household incomes of less than $24,000.
In the Colorado area, call Net Prophet today at (303) 396-5707. Our accounting services and experts continually work hard to stay current on every change in the tax laws. Let our knowledge and experience work in your behalf to get you all the tax breaks you deserve.