Tax Reform 101: 5 Things To Do Now

Tax Reform

Even if you didn’t owe money this past tax season, it’s more important than ever to get ready for the upcoming tax season now. With so many changes under the new tax reform law, we wanted to break down five big changes and the moves you can make now to help you save money on your taxes when you file in 2019.

Lower tax rates, more money. One of the biggest changes under the new tax law that may impact how much you need to have withheld from your paycheck is the reduced tax rates. Tax rates were reduced about 1 – 3% for the majority of taxpayers so you may be seeing more money in your paycheck. Although the IRS adjusted the withholding tables that employers use to produce the correct amount of tax withholding for people with simpler tax situations, for instance, those who only take the standard deduction, the withholding tables don’t reflect some of the other changes that impact more involved tax returns like the reduction of some  itemized deductions. To make sure you give your employer the right W-4 withholding allowances to boost your tax refund — or your take-home pay you can use the updated TurboTax W-4 calculator.

Elimination of personal and dependent exemptions. Under the new tax law the personal and dependent exemptions of $4,050 were eliminated. If you are married and have a few kids, the elimination of your personal and dependent exemptions can mean a  reduction in the number of write-offs you once had.

Increase in the Child Tax Credit. Although you’re no longer able to take the dependent deduction, the new tax reform law increased the Child Tax Credit from $1,000 to $2,000 per child.  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, which means more people will be eligible for the credit. Because the Child Tax Credit is for kids under 17, if your not so little one celebrated their seventeenth birthday this year, you may see a change in your taxes, since you can no longer take the Child Tax Credit for your 17-year-old.

Changes if you’re a homeowner. If you are a homeowner or are considering buying your dream home, some of the changes in the new tax law are very important for you. As an existing homeowner, 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. Due to the cap on these tax deductions, you may now also have to take the standard deduction on your taxes instead of taking itemized deductions since the standard deduction has almost doubled. Don’t worry about knowing if you should take the standard deduction or itemize your tax deductions at tax time. TurboTax will ask you simple questions about you and give you the option(standard deduction or itemized) that you’re eligible for based on your entries.

If you are considering purchasing a new home this year, one thing to keep in mind is 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 already own a home. If you are trying to make a decision between purchasing in a high property state like California or a state with lower property prices, knowing about these changes could help you with your decision.

Elimination of tax deductions. The new tax reform law eliminated several popular tax breaks starting in tax year 2018 (the one you file in 2019) like miscellaneous itemized deductions. This includes deductions such as job search expenses, un-reimbursed work expenses, investment expenses and tax preparation fees, exceeding 2% of adjusted gross income as well as moving expenses.

What Can You Do Now?

Adjust your withholding allowances. One of the best things you can do is to use the TurboTax updated W-4 calculator to boost your tax refund — or your take-home pay.

See where you stand. You can also use TurboTax TaxCaster to see how the new tax law impacts you. TurboTax TaxCaster will give you a side by side comparison of how the new tax reform law impacts you based on your specific situation.

Reduce your taxable income. You can decrease your taxable income by making smart money moves throughout the year like investing in your 401K or IRA. Also, don’t forget expenses like paying student loan interest can be tax deductible and will decrease your taxable income at tax time.

Don’t worry about knowing the new tax laws. TurboTax has you covered and will be up to date with the latest tax laws at tax time. If you have tax questions, you can connect live via one-way video to a TurboTax live CPA or Enrolled Agent to get your tax questions answered at tax-time

Check back with the TurboTax blog and the TurboTax Tax Reform Center for Tax Reform updates and the latest tax news.

Comments (76) Leave your comment

  1. I used turbo tax to file my 2017 taxes but can’t remember how to get into that account and I need last years aig to efile how do I get my last years aig from turbo tax?

  2. Why did Trubo tax file a 2210 form when I over paid my taxes by $2,872 using withholding and timely estimated deposits and now tell me I made a mistake on my return and not telling where?

  3. my husband and I are both paying on our student loans, when I entered the interest this year we didn’t receive any credit and it was a substantial amount? can you explain why?

  4. Thank you so much Lisa you have answered all the questions I didn’t even asked like I’m 68 years old we have big donations to our church and local charities also however I was just wondering how should we file my husband is an independent contractor a food Currier, however I’m retired collecting social security and my little pension???? Should we try to file married but file separately or should we still file jointly like we did before to maximize our deductions?

  5. If you itemize instead of taking the standard deduction …do you get a marriage filed jointly deduction in addition to medical , charitable, mortgage interest, etc.?

  6. My Mother became very ill in April and she quit claimed her home to me so I could easily sell it for her. All the proceeds were given to her after sale. She and her husband who has Parkinson’s now live with me. How do I avoid paying gift and capital gains on a property I only sold but never received any compensation for.

  7. Hi;I know it’s the end of the year 2018 however I wanna file my taxes for 2017 I was told it’ll be free. Is it to late for me to file free, because all I’m seeing is premier or deluxe?

  8. We are filing married & jointly. Our son is not under 17, but we are paying college tuition & board for him. We have income from savings bonds we redeemed, but all of the money went toward our son’s tuition. Are we restricted to the standard deduction?

  9. Will still be able to clsim the child tax credit for my high school senior who lives at home and who will turn 18 December 20th?

  10. I have asked this question twice before, but TurboTax has not or cannot answer. If the answer is known, please reply with the answer to my email address as well as posting on your website.

    Under the 2017 Form 1040, Item 39a, retired folks over 65 years of age could get an additional tax credit (exemption) because of age and still another if a person is legally blind. Have these tax credits been eliminated? If so, does that mean folks over 65 years of age are now considered the same as members of the work force who receive a weekly or monthly paycheck? Please advise.

    1. Hi Robert,
      Yes you still get the additional deductions for being 65 and over or legally blind.
      Thank you,
      Lisa Greene-Lewis

  11. how does the new tax law efect a retired single person with a minimal income in addition to SS#? Can you still itemize donations in kind (goods) to charaties. What ar imits if any?

    1. Hi,
      You can still itemize if your deductions are more than the standard deduction ($12,000 single and $24,000 married filing jointly) Plus you get an additional deduction if you are 65 or over or legally blind. If your deductions are under the standard deduction amounts you will take the standard deduction. If they are over that amount you can still itemize and also claim your donations to charity. Here is our quick free interactive tool to help you estimate
      TurboTax will also be up to date with the latest tax laws and will figure out whether you benefit from taking the standard deduction or itemizing based on your entries.
      Lisa Greene-Lewis

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