Tax Reform Changes – What you need to know about the changes

Tax Seasons is in full swing. How do you plan on filing this year? Are you going with a tax professional or do you prefer to file online from the comfort of your home? What you need to take notice of this year is the new tax reform changes that are in affect for 2019.

This year I’ve teamed up with H&R Block to help you make tax season a lot less stressful for you. With H&R Block you either file at home or in one of their 10,000 stores, and regardless of which method you use you will get amazing customer service!

Last month I posted a blog post where I showed you how I organize my papers for tax season and also how to easily file your taxes.

In this blog post I created a video to show you the benefits of both ways, so make sure that you watch that video below.

A huge change this year is the effect of the new tax laws. You may notice some changes this year when doing your taxes, and that is because a new Tax Reform law was passed in 2017. This year was the first year the changes from that law are in effect, and many of these changes will affect your return.

Here are 6 major changes in 2018 due to the new tax reform:

1.) Difference in Income Tax Brackets and Marginal Tax Rates

Tax brackets and tax rates have changed for most taxpayers with tax reform.

In general, the tax brackets for 2018 and beyond are more expansive, and the rates are lower. According to H&R Block’s analysis of the Tax Cuts and Jobs Act (TCJA), the new tax brackets mean that most taxpayers will pay less taxes this year.

See the chart below for a comparison between 2017 and 2018 tax brackets

2.) Increase in Standardized Deductions

There have been many itemized deductions that have been eliminated, limited, or modified with tax reform changes.

Many people who have itemized their deductions in the past may not want to this year. With the new higher standard deduction, it may not make sense for them to itemize this year. For more information on the changes in standardized deductions this year check out this article on changes in tax reform laws from H&R Block.

3.) Child Tax Credit change

With the new federal tax law, the child tax credit is doubled to $2,000 through 2025.

The refundable portion of this credit is $1,400 and the child must have a valid social security number.

Special rules apply if the parents are legally separated and divorced.

4.) More uses for your 529 plan

Most education-related tax benefits remain, but there are a few changes with the new tax law.

You can now use your 529 plan for more than just college tuition. You can now use it to pay for private schooling for K-12 elementary and secondary schools!  For more information on this, read my article on how to get started with a 529 account.

5.) Change in amount of medical supplies you can deduct

The IRS allowed you to deduct qualified medicalexpensesthat exceed 7.5% of your adjusted gross income for 2017 and 2018.

Beginning in 2019, all taxpayers may deductonly the amount of the total unreimbursed allowable medicalcare expenses for the year that exceeds 10% of their adjusted gross income.

6.) No more penalty for not having health insurance (this won’t occur until 2019)

The healthcare penalty is eliminated starting in tax year 2019, which will affect your filing in 2020.

Even though the penalty is eliminated in 2019, taxpayers will continue to receive Forms 1095-A, 1095-B, and 1095-C and should file these with your 2020 return.

For more information on how the Tax Reform Law will affect your tax return this year, head over to H&R Block and click on the Tax Reform tab.