With 2018’s tax season now under way, it’s time to run through all the changes that millions upon millions of Americans will soon face as they go to file. Those who like to put off filing their tax returns should pay attention, as these changes are sweeping and may affect deductions and itemizations you’ve counted on for years as a way of decreasing your reportable income.
In a recent interview with the Green Bay Press Gazette newspaper, Thomas Batterman spoke of the new cap on state and local tax deductions. Now imposed as part of the federal tax overhaul is a $10,000 limit on itemization of these taxes -- plus a new standard deduction for married couples of $24,000. According to Mr. Batterman, a trusted fiduciary with Financial Fiduciaries WI, couples in a situation where they are trying to reach the $24,000 deduction would need to itemize for charitable contributions or medical expenses. “We expect the number of taxpayers who are going to be itemizing will be down significantly; many may find they are able to prepare their own tax returns going forward,” Thomas Batterman told the newspaper for its Feb. 3, 2018 article.
Another new development on the financial front -- and just in time for tax season -- is the alternative minimum tax (AMT) on supplemental income. This parallel tax structure has its own set of rules, Thomas Batterman says, and clearly outlines the deductions that can’t be made. According to Mr. Batterman, the investors who previously paid AMT taxes may escape the burden this year due to the new $10,000 limit. “Not only did they increase the exemption, but they increased the income at which the exemption would phase out, knocking out another large swath of taxpayers who will no longer be subject to the AMT,” Thomas Batterman said.
Of course, not every change directly affects middle class America. The corporate rate tax, which has been lowered by the current administration in Washington, D.C., was intended to keep U.S. businesses here -- as well as their profits -- in the country. Mr. Batterman expects that to occur, too. As for common filers who have an LLC or partnership, a new opportunity to take a 20 percent deduction on the pass-through tax is now in place. Single filers earning above $157,000 and married joint filers taking home at least $315,000 would be able to take advantage of this new opportunity. “While things are different, the good news is that almost every taxpayer should see some reduction in their taxes,” Thomas Batterman of Financial Fiduciaries said.
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