How Will Tax Reform Affect My Refund Next Year?

Tax Reform Stocksy_txp99f5a1ba6pn100_Medium_1260279

We know that you work hard for your money and often a tax refund may be the biggest check you get all year, so we’re here to let you know how the new tax reform legislation may affect your tax refund next year.

The new tax law is the largest piece of tax reform legislation in 30 years and was signed into law on December 22, 2017. For most people, these tax changes impact tax year 2018 (the taxes you file in 2019) and not tax year 2017 returns. Overall, the changes associated with the new tax law may lower taxes for individuals and small businesses.

Some of the highlights for taxpayers include:

  • Lower individual tax rates
  • Increased standard deduction
  • Increased child tax credit
  • Elimination of dependent and personal exemptions
  • Elimination of some itemized deductions
  • $10,000 cap on the deduction for state income taxes, sales, and local taxes, and property taxes combined
  • 20% deduction for “pass-through” entities (sole proprietorship, partnership, S corp.)
  • Increased expense limits for capital assets

So just what will these changes mean for your 2018 tax refund? Here is a break down based on your individual tax situation.

A Family with Kids

Although there was an elimination of the dependent exemption deduction beginning for tax year 2018, families with kids may see a bigger tax refund next year since the child tax credit doubled and went from $1,000 to $2,000. In addition, the amount that is refundable grows from $1,100 to $1,400. The law also adds a new, non-refundable credit of $500 for dependents other than children. Finally, it raises the income threshold at which these benefits phase out from $110,000 for a married couple to $400,000. Tax credits are a direct reduction from the taxes you owe so they mean more than a deduction that reduces taxable income.

Claims the Standard Deduction

If you normally claim the standard deduction you may see less tax liability in 2018 since the new tax law nearly doubles the standard deduction amount. Single taxpayers will see their standard deductions jump from $6,350 for 2017 taxes to $12,000 for 2018 taxes (the ones you file in 2019). Married couples filing jointly will see an increase from $12,700 to $24,000. These increases mean that fewer people will itemize. Today, roughly 30% of taxpayers itemize. Under the new law, this percentage is expected to decrease.

Claims Itemized Deductions

If you claim itemized deductions you may see fewer tax deductions that lower your tax liability especially if you live in a state with high property taxes since the new law limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes have generally been fully tax deductible.

The law also caps the amount of mortgage indebtedness on new home purchases on which interest can be deducted at $750,000 down from $1,000,000 in current law.

If you itemize you will also see the elimination of some miscellaneous itemized deductions like unreimbursed employee expenses under the new law.

Self-Employed, S Corps, and Partnerships

If you are self-employed or have an S-Corp or partnership you may see lower tax liability which may increase your refund since the new law includes a 20% qualified business income deduction for incomes from certain type of “pass-through” entities and almost doubles the amount small businesses can expense when they purchase business equipment from the 2017 Section 179 amount of $510,000 to $1,000,000.

What do you need to do?

Because of the changes to the 2018 tax laws such as changes to itemized deductions, increased child tax credit to $2,000, the new dependent credit, and the eliminations of dependent and personal exemptions, you should file a new Form W-4 with your employer in response to the new tax law, if your personal situations changed, or if you started a new job.

TurboTax has you covered and has an updated W-4 calculator that you can use to easily figure out your withholding allowance so that you can update your W-4 with your employer. TurboTax Tax Caster can also help you estimate your tax liability for 2018.

Self-employed and small business owners may also wish to make adjustments to estimated taxes they pay. QuickBooks Self-Employed will help you easily figure out your estimated taxes.

TurboTax Has You Covered

TurboTax has you covered and will be up to date with the latest tax laws.

 

Comments (52) Leave your comment

  1. How will this affect my tax refund if I’m an Injured Spouse, married, filing jointly, have 4 dependents with my spouse who has debt with the IRS?

  2. Tax reform has hit people on work visa holders very hard. My last year’s refunds were over 2500$, this year it is just 2$. Kudos to reforms !

  3. If your tax limitation deduction is $10,000 on your 2018 return and your actual taxes paid for real estate alone are over $10,000, will any of your state income tax refund be taxable when you file your 2019 return? If so, how would the taxable amount of the state refund be calculated?

  4. I have $18,500 in mortgage interest but when I enter the amount I only get roughly a $950 tax deduction. Last year with approximately the same interest amount I got a $4,500 deduction. What happened in 2018 that I am not getting my full deduction on a $500,000 mortgage?

  5. My personal situation: I have gotten over $5000 refund every year for ten years. This year 2019, for tax year 2018 it is ZERO. literally. That is how the new changes affected me. Paid $18k to a university the 1098-T says NOTHING deductible. Pay $15k in prop taxes, can only deduct 10. Very bad , we count on that money to pay food and energy bills.

  6. Working on our taxes… teacher and nurse here… earned $5000 less, paying $5000 MORE IN TAXES!! First time in 20 years we have not received a REFUND…. Are we winnng?!!’!

  7. In the past handful of years our refund has been anywhere from $6000-$9000. We make a few thousands dollars more this year but that is the only real difference. Using turbotax right now, it shows my refund to be around $700.

    Why the huge difference?

  8. My 2017 tax refund was $8000, my 2018 refund is only $800.00 How in the world can this be? What has changed so dramatically?

  9. I can’t believe that the new tax changes can hurt the elderly even more. At age 70, with deductions of $28,000 in the past, plus the $8100 personal exemption, I would have a taxable income reduced by these two amounts. Now I have just $28,000 in deductions so my taxable income goes up for $8100. I do not think the tax tables make up for this? Let’s make sure the billionaires get their cuts.
    Something seems wrong with the thought process of who will pay to make up for the tax cuts.

  10. Are registered Domestic partners in California treated as married under the new tax law ? If we have filed separately as single before will we be ok to file as married ? Thank you.

  11. The standard deduction has been increased for me and my wife to 24000, but by eliminating the personal exemption of 8100, my tax liability is the same as last year. Don’t see where this increase in the standard deduction is beneficial to anyone.

    1. Because you went from 12000 to 24000 deduction, that is a 12000 increase. If you take that 8100 out, you still have 3900 hundred less you are being taxed for.

    2. Hi… It’s not… I just did my taxes and because of the new tax law, i am not able to claim the property tax and the mortgage interest that I paid on my house for 2018! I also now have to adjust my exemptions for the year 2019 to ensure that enough taxes are being taken out.

      What a ripoff for the hardworking taxpayers….In my opinion, this tax law must affect others from other planet (or maybe the rich)!

      So disappointed!!

  12. i read something about average refund of 2800. I usually get bigger refunds everyyear as I always put 0 dependent on W4 and I have 4 children and a mother as a dependent. Will I still be able to get my full refund no matter how big it is? or would there be a cap for this as well?

  13. Will we still have to pay the fine for not having health insurance for 2018? Filed in 2019? Also, my husband passed away in June, I know that I can still file married filing joint for this year. However, will the refund come in my name or still his? The bank we had our joint account at and where our refund was always automatic deposited made me take his name off of the account. Will I need to have a paper check sent to the house? And if so, how will I cash it with is name on it and him not being here to sign it?

    1. I am no tax expert but you should definitely have the refund go to direct deposit. That way at least one name on the check is required on the bank account for the money to be deposited. If you get a paper check with both names, you won’t be able to cash it anywhere.

    2. Sorry for your lost. When you file your taxes and expected return you can actually enter new bank information. It will not come in either or name if deposited to an account. Just make sure your name is on the bank account. For the insurance there will still be a fine this year, but not next year.

    3. If the bank has your history and has his death certificate. You would sign his name and put deceased and sign your name as well

    4. if you are the primary tax payer the refund will be in your name because they will input into the system that he has died. So no need to worry about getting your refund.

    5. Double endorsed the check if it comes in his name on the back of the check sign his name first and then you name under his that makes the check yours and you will be able to just deposit into you account its basically like he signed the check over to you and you should have no problem with that again sign his name first then yours under his and just deposit it.save yourself the headache with these banks and the run around you dont need it it should not be a problem your still his wife and u have every right to do so

  14. You mentioned that being 65 and older allowed for the additonal 1250.00 deduction and implied it was for married couples. Why don’t single filers get this, or don’t they?

  15. TurboTaxLisa

    Will TurboTax release a “draft” version of its software before the end of 2018 to assist us in making last minute financial decisions.

  16. Is interest paid on a line of credit secured by my principle residence used to pay a divorce settlement deductible in 2018?

  17. Is it true that the new laws eliminate the home office deduction ? That’s a big loss for those who work out of their home as part of their employment.

  18. What will be my standard deduction in 2018, if my parents claim me on my taxes. My income for 2018 will be about $11,500

  19. Will charitable deductions, including cash and donations of goods, still be allowed when filing 2018 taxes? Thanks

    1. We can no longer claim equity line interest or student loan interest? The Feds have raised the interest rate three times in the last year so equity line payments and student loan payments have gone way up.

  20. On the taxcaster do we just put in our SS and pensions under wages? Will all our SS be taxed? We each have a monthly state pension plan. Also, are any of the deductions that we wrote in deductible next year? What receipts do I need to keep? I thought medical was going away. What about Charitable?

    1. I will have a full year of retirement this year and will possibly be filing married single (not joint). What is the maximum income allowed before having to pay income tax (considering standard deductions)

    2. They need to do something about the taxable amount of the social security income. They have done nothing for the senior citizens.

    1. Hi Randy

      As a 1099 contractor you should be filing a Schedule C to report your income and expenses for the year. You will still be able to deduct expenses related to the business in 2018. Things like vehicle mileage and supplies are still valid deductions in this situation.

      Thank you

      TurboTax Derek

  21. On next year’s taxes, what about senior (65 and Older) standard deduction rates? Will it be doubled for married couples over 65?

    1. Hi,
      Yes married couples 65 and over will have standard deduction of $24,000 plus an additional amount of $1,250 for each of you if you are each 65 or older.
      Thank you,
      Lisa Greene-Lewis

      1. You didn’t quite answer the question about doubling for filers over 65. In 2017 the standard deduction was doubled for seniors over 65. Will it now double to 48,000 for married couples over 65?

  22. When my return is completed this year (2017), will I be able to forecast my next year’s (2018) income taxes if my income remains about the same under the new tax law changes? Will I also be able to print out a W-4 to give my employer to help insure about the same refund or a larger one?

  23. I have done my 2017 taxes with TurboTax. The refund was $1550.00. Today, I used Tax Caster, using all the numbers from my 2017 tax form. Tax Caster said my refund, for 2017, should be $3046.00.

    Any thoughts on the discrepancy?

    1. Hi Carl,
      TaxCaster is only to get an estimate as it does not ask all of the questions about your tax situation like the program does.
      Thank you,
      Lisa Greene-Lewis

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