The end of 2017 saw the most dramatic overhaul of the US Tax Code in decades. While a great deal of information has come out about the change, most of it does little good for the average taxpayer. Below are a few of the key bits of information you need to know about the next tax laws.
Most of It Isn’t Here
It’s important to note that the tax laws have changed, but that those changes were specifically made for 2018. As such, most of what you’ve heard about isn’t going to go into effect for your current return. There are absolutely some major changes coming down the pike, but these changes are still a year away. In fact, most consumers won’t see any major tax differences until February.
While you’ve likely heard a lot about tax rate changes and withholding changes, these won’t impact your 2017 return. Likewise, changes to the standard deduction and the personal exemption won’t show up for another year. While this does mean you have time to plan for how you need to manage your money in the upcoming year, it’s also important to realize that tax professionals are going to be spending much of the next year wrestling with the ramifications of the major overhaul of the tax code. As such, there will be a great deal of information that’s still being sorted through even as the changes start to go into effect.
Individual Mandate Still in Effect
One thing that is certainly still in effect is the individual mandate for the Affordable Care Act. You’ll need to show that you either had health insurance during 2017 or that you qualify for a waiver from the mandate. Otherwise, the penalties that were in place last year will still apply. It’s important to note that the IRS will not be processing returns that leave this section blank; while that might have worked in 2016, the IRS has made it clear that everyone will have to fall into one of the three categories above during this tax filing season.
A Change in Exemption and Deduction
Some of the biggest changes that will impact taxpayers in the coming year have to do with exemptions and deductions. One of the major pushes in the current tax bill was to eliminate the number of people who itemize their deductions, so the standard deduction is doubling. At the same time, though, the Personal Exemption is being done away with entirely. Depending on the size of one’s family, the two changes may end up canceling one another out or some could even see their tax burdens rising. It’s definitely something that taxpayers will have to keep their eyes on in the future.
Worst Case Scenarios Didn’t Come to Pass
It’s a good idea to note that some of the worst-case scenarios with this tax bill did not come to pass. Student loan interest and medical expenses can be deducted, as can supplies that teachers buy for school. Tuition waivers for graduate students are still safe from being taxed, which was a major concern for many in academia. While there are many changes to the tax code about which many have concerns, it does look like some of the mostly commonly-cited issues saw little or no change.
It’s Still Complex
Despite claims to the contrary, the new tax bill has done relatively little to make the process of filing taxes easier. While a few exemptions and deductions have gone away, the code itself is still as byzantine as ever. Tax preparers around the country are doing their best to get ready for all of the major changes over the next year, but the truth is that the changes to the tax code will probably make it more difficult to file in the near future. Unless you fall into a few very specific circumstances, you shouldn’t expect your taxes to get much easier.
It will be more important than ever to keep up with one’s taxes this year. Change means new loopholes, new problems, and new forms for most taxpayers. Whether your interest in the tax change is academic or motivated by monetary concerns, it’s a good time to pay attention to what’s going on in the world of taxation.