In mid of December 2017, the Senate approved Trump new tax reform, to be applied effectively from January 1, 2018.

Is it permanent? will it affect me? Am I getting a bigger bill this year due to the new tax reform?

all these questions and more might be keeping you up lately, especially when the expats filing deadline just around the corner.

Well, the answer to all these questions depends on your case, will definitely cover some of the most important changes that might affect you.

Changes in Tax Rates

For 2018, most tax rates have been reduced. which is good news as it means most people will pay less tax starting this year. 
2018 tax rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

Standard Deduction

standard deductions nearly got doubled 

Single and Married Filing Separately: $12,000 vs. $6,350
Married Filing Jointly: $24,000 vs. $12,700
Head of Household: $18,000 vs. $9,350

 You have the choice of either taking a standard deduction or the itemized deduction. 
If your standard deduction is more than your total itemized deductions, claim the standard deduction, and in this case, you might skip filing  Schedule A with your tax return, as it won’t make any difference.

Personal Exemption Eliminated

Under the tax reform, the $4,050 you could claim up until 2017 for yourself, your spouse and any eligible dependents is now history.

 That will work out well for singles and couples, but it will be a definite negative for anyone with dependents.

Child tax credit and additional child tax credit

In 2018  the maximum credit increased to $2,000 per qualified child instead of $1000, with the possibility of getting back Up to $1,400 of the credit, instead of $1100 in 2017 for each qualified child.

The tax reform bill also introduces a new $500 credit for non-child dependents.

Also, the income threshold at which the child tax credit begins to phase out is increased to $200,000, or $400,000 for married couples filing jointly

An important thing you should take it into consideration, your child must have a Social Security Number 
before the due date of your tax return to claim him as a qualified child for
the Child Tax Credit or Additional Child Tax Credit. Children with an ITIN can’t be claimed for either credit. 

 

Charitable contributions


This year your charitable contributions in cash have increased from 50 percent to 60 percent of your adjusted gross income.

 

Qualified Business Income Deductions


Taxpayer who is self-employed, LLC, Rental Properties, S Corporation, and partnership can generally deduct 20% of qualified business income.

Individuals earning $157,500 and married couples earning $315,000 are eligible for the full deduction.

Alimony

If you pay alimony, unfortunately, it will not be deducted form your taxes, but if you are the one who is getting the Alimony, lucky you, it will not be included in your income. 

Itemized Deductions

As we know the standard deductions got nearly doubled, however, You may not claim the standard deduction if you claim Itemized deductions, good news that Limit on overall itemized deductions got suspended.

Medical expenses

Unlike last year medical expenses had to exceed 10% of your adjusted gross income in order to be deductible
now medical expenses that exceed 7.5% of your 2018 adjusted gross income are deductible.
the good news that Limit on overall itemized deductions got suspended.

Home mortgage

As per the IRS if you pay interest on home equity loans it is not deductible unless you use the loan to buy, build or substantially improve your main home or second home.

So, if you used the loan to pay personal living expenses, such as credit card debts, it is not deductible.

if you do itemize…for existing mortgages, you can continue to deduct interest on a total of
$1 million in qualifying debt secured by first and second homes but for new homeowners buying in 2018, you can
only deduct interest on a total of $750,000 in qualifying debt for a first and second home

Published by the IRS

Until 2017 a homeowner can deduct interest paid on mortgages valued up to $1 million of principal residence and one other qualified residence. And interest paid on a home equity line of credit up to $100,000.

In 2018 a homeowner can deduct interest paid on mortgages valued up to $750,000 of principal.

Moving expenses

Moving expenses are no longer deductible unless you are a member of USA armed forces.

 

 

Something we should know that most of these changes are not Permanent, it is only till 2025, if you find it complicated and you cannot get hold of everything, contact us, We’ve got your back! contact us now
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