Will your taxes increase under the new tax code? | Taxes

With the new tax bill passed last year, you might be wondering how the rewritten tax code will change personal tax exemptions, credits, and rates for the 2019 tax filing season. there are many factors that can affect your tax increase under the revised tax code, such as your tax bracket, if you typically benefit from deductions and your family size, other aspects need to be taken into account.

If you are considered an average taxpayer, you may pay less. According to Mark Luscombe, senior analyst at Chicago-based Wolters Kluwer Tax & Accounting. In general, most taxpayers should see at least a modest reduction in federal income tax this year due to the combination of lower tax rates, an increased standard deduction and [an] increase in the child tax credit, ”he said.

Yet, due to the loss of personal exemptions and the reduction in deductions that can be itemized, there will be scenarios in which some taxpayers will see a tax increase, Luscombe adds. “A richer couple with two children who claimed an itemized deduction of $ 30,000 for state and local taxes would now be limited to a deduction of $ 10,000, a loss of $ 20,000 in deductions,” he explains. “Assuming the taxpayer is always better off, he would not reap any benefit from the increased standard deduction, but would also lose exemptions totaling $ 16,200. If his taxable income were otherwise $ 100,000, the loss of $ 36,200 in deductions at a 24% tax rate would cost $ 8,688 in taxes. While they would get some benefit from the increased child tax credit – $ 2,000 – overall they would still have higher taxes than under the old law. “

If you have a large family, you can pay more. The new tax code removed personal and dependent exemptions, each of which was expected to be worth $ 4,150 in 2018. This could benefit some taxpayers, as standard deductions are larger. In 2017, the standard deductions were $ 6,350 for singles, $ 12,700 for a married couple declaring jointly and $ 9,350 for heads of household. In 2018, the standard deduction is $ 12,000 for single taxpayers, $ 24,000 for married couples and $ 18,000 for heads of households.

The new rules are not so good for large families. “On the loss of exemptions, a couple with four children would suffer a loss of six exemptions – $ 24,300 – while increasing their standard deduction by just $ 11,300,” Luscombe said. “If their taxable income had otherwise been $ 40,000, this $ 13,000 increase in taxable income would have resulted in an additional tax of $ 2,860 at the new tax rate of 22%. If they only benefit from the refundable portion of the new, higher child tax credit, they would be entitled to an additional $ 400 per child, which would translate into a benefit of $ 1,600, still less than the amount. ‘additional tax arising from the loss of exemptions. “

If you are planning on filing for divorce in the near future, your taxes may increase in the near future. In 2020, the tax return for 2019 will change dramatically for divorced couples. “Alimony paid for divorces occurring after December 31, 2018 will no longer be deductible. For these new divorces, the paying spouse will not be able to deduct the alimony, he [the paying spouse] will pay both alimony and tax on that income they don’t keep, ”said Michael Law, a chartered accountant at Canopy, a Lehi, Utah-based company that produces software for tax accounting for accountants.

In the past, the spouse who received support had to claim the payments as income and pay tax on it. From now on, in 2019, the spouse who receives the support will receive it tax-free. Couples who divorced in or before 2018 who paid support and deducted the payment will not be affected by the new law. This only affects those who divorce in 2019, which could make the end of your marriage even more controversial, if you separate now, suggests Law.

For those considering divorce and likely to pay child support, Law says that from a financial standpoint, you should finalize your divorce before the end of the year to preserve the withholding of child support. “If you are likely to receive alimony in your current divorce, you have a significant reason to drag your feet after the end of the year to have this alimony exempt from tax,” he adds.

If you currently have standard deductions, your taxes will likely increase. “An example of a filer whose taxes are likely to increase would be a captive insurance sales agent who receives a salary plus a commission and covers most of his own business expenses,” says Steven Weil, a registered agent and president and director of taxes. director of RMS Accounting in Fort Lauderdale, Florida. An example of the type of taxpayer who might see their taxes increase is one who earns a salary, but also receives a commission and covers most of his business expenses.

Weil cites some of these business expenses as likely the use of a non-reimbursed car, meals, and marketing materials, such as mail sent to potential customers. These expenses can really add up, and without being able to use these deductions, this type of taxpayer could easily see their taxes in 2019 increase by several thousand dollars. On the other hand, because the standard deductions have been increased, this may work in favor of a taxpayer.

In addition, the personal exemption – $ 4,050 in 2017 – used to reduce a taxpayer’s taxable income has disappeared with the overhaul of the tax code. You’ll also want to check out the withholding tax tables on IRS.gov which determine the amount of income tax to be deducted from your paycheck. In February, the IRS changed the withholding tax tables, which are calculated based on the number of allowances you claim and the amount you earn. If you don’t withhold enough from your paycheck, you risk having to pay taxes.

Parents of children 17 and over may see their taxes increased. “If you have one or more children who are over the age of 17 who are still dependent, it will cost you at tax time,” Weil said.

In fact, under the new tax law, parents who have children under the age of 17 will receive a tax credit of $ 2,000 per child instead of the $ 1,000 credit in 2017. But if your child has 17 years of age or older, you only receive a $ 500 tax credit – probably around the time you assess your options for pay for college and could use a financial break.

Homeowners with high property taxes. If you own a property in another country, these taxes can no longer be deducted. Meanwhile, in the United States, the new tax code for personal and local property taxes and personal and local income taxes, itemized deductions are limited to $ 10,000 ($ 5,000 if using the separate marriage declaration status). So if you live in a state like New York and California, where the average state and local tax deduction is around $ 20,000, you could end up seeing your tax bill go up dramatically.

Still, if you think your taxes will go up under the new tax law, don’t panic. If you’re worried, you might want to hire a tax professional, and if you’re doing them yourself, give yourself plenty of time to do your taxes. But it doesn’t make sense to assume that your taxes are going to go up. As Weil says, “Due to the complexity of the changes, one cannot know exactly how their situation will be affected without calculating the numbers. The only thing we can be sure of is that there will be both winners and losers this year. “

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