New Tax Law H.R.1
There are numerous sites that have tried to capture all the new additions and changes to the new tax law. Some are really good and others just missed the mark. Remember to always follow these simple rules to make sure you know how the law impacts you:
- Do research and find the areas you believe impact you.
- Verify the facts with the source.
- Lastly, get help from an expert to see if you have interpreted the impacts correctly.
The law is very complex and very politicized. I have seen many left leaning articles that leave out key facts just to get you scared and on the other side I have seen language over simplified to make some benefits larger than they are.
At the end of the day, the new law will benefit a lot of people and hurt a lot of people depending on your overall circumstance. It is very disappointing that the law could not simplify the code and equalize everyone’s understanding.
One thing is clear, if you do not ever itemize and have no exceptions your filling will be rather simple. However was it not before? Those who do itemize now have new limits, new exclusions, and altered levels of phase outs.
One thing that is somewhat hidden that I feel most outlets did not make clear is section 11041 Suspension of deduction for personal exemptions. One of the largest selling points was the new brackets and the lower overall tax you will have to pay. While this is true for most, the personal exception goes away completely which basically increases your taxable income. Now, this is offset by the higher Standard Deduction, but when you are told the std. deduction goes from 6K to $12K, many thought a $6K benefit of offsetting deductions when in fact it is only $2K.
Here is a very basic example:
|Adjusted Gross Income (AGI):||$50,000|
|Greater of Itemized or Std. Deduction:||$6,350|
You can see the difference in taxable income from 2017 and 2018 is only $1,600. If the personal exemption did not go away, the taxable income would have been a lot less.
Things like this are why it is so hard to know your true impact without some help. Make sure you ask an expert or use a reputable site to calculate the impacts of the new tax law.
H.R.1 as passed: