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Four Tax Breaks that Survived Tax Reform

Posted on October 17th, 2018

The Tax Cuts and Jobs Act (TCJA) affected many provisions in the tax code for individual taxpayers. Some deductions were modified or completely eliminated. It is important to understand those that were changed to avoid any surprises when it comes time to file your returns.

1.Mortgage Interest Deduction

Taxpayers can still deduct mortgage interest. However, beginning in 2018 married taxpayers may only deduct interest on $750,000 of qualified residence loans ($375,000 for single filers) for new homes. That limit is down from $1 million for prior tax years. Existing mortgages are grandfathered in, and taxpayers who purchase such residence before April 1, 2018, are able to use the prior limit of $1 million.

2.State and Local Tax Deduction

In prior years, taxpayers who itemize were allowed to deduct the amount they pay in state and local taxes (SALT) from their federal tax returns. Under the new TCJA reform, the State and Local tax deduction is limited to $10,000 for married taxpayers ($5,000 for single filers).

3.Educator Expense Deduction

Primary and secondary school teachers are still able to deduct $250 for unreimbursed expenses for buying school supplies. Expenses incurred for professional development are also eligible.

4.Medical Expense Threshold Amounts

Taxpayers are still able to deduct medical expenses. For tax years 2017 and 2018, the threshold amount for medical expense deductions is reduced to 7.5% of AGI. Previously, the medical expense deduction was 10% of AGI.

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The New Act Could Affect Your Paycheck Now

Posted on August 24th, 2018

The New Act Could Affect Your Paycheck Now

How often do you think about your paycheck’s withholdings? Like most, it only comes up when you start a new job.  The Tax Cuts and Jobs Act (TCJA) is going to affect many individuals immediately. The TCJA has greatly changed the old tax code to which we are accustomed. The changes from this Act mean your tax situation may have changed. To avoid surprises at tax time, you should check on your paycheck withholdings before the end of the year.

 

The Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act (TCJA) nearly doubled the standard deductions and changed a number of itemized deductions. For taxpayers who previously itemized, it may now be more beneficial to take the standard deduction. These changes could affect how much a taxpayer’s employer should withhold from their pay.

 

Deductions Have Changed

Because of the TCJA changes to standard and itemized deductions, the IRS encourages taxpayers, especially those who have itemized in the past, to perform a quick “Paycheck Checkup” for 2018 to make sure there are no surprises when their return is filed in 2019.

 

What does this mean? Too little tax withheld can mean an unexpected tax bill or penalties. Taxpayers may also have too much tax withheld, with the average refund exceeding $2,800, and may prefer to reduce their withholdings and see a larger paycheck throughout the year.

 

The “Paycheck Checkup” Is Easy & Safe

To perform a “Paycheck Checkup”, use the IRS’s Withholding Calculator located on the IRS website at http://www.irs.gov/withholding. We recommend you have a copy of your most recent paystub(s) and your 2017 Tax Return. The calculator results are dependent on the accuracy of the information you entered.  Please note that the Withholding Calculator does not request personally identifiable information such as name, Social Security Number, or address. The IRS does not retain the information entered.

 

A New W4 Form

Taxpayers who need to complete a new W4 based on the results of the calculator should fill one out and submit to their employer as soon as possible. The earlier a corrected W4 is submitted means more time for adjustments to be made.

 

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Call our office at 804-378-0087 for more information or assistance with your “Payroll Checkup”.