Long before the government shutdown, Congress passed the largest tax reform legislation in more than three decades. This new law went into effect on January 1, 2018 and will potentially impact millions of tax returns. One of the many changes to the tax law were lower income tax rates and revised brackets. While the change kept the total of 7 different tax brackets, it lowered the rates and changed the income thresholds for many of the brackets.
The new lower brackets will be: 10%, 12%, 22%, 24%, 32%, 35% and 37%
Along with the new lower tax rates there is additional tax relief for individuals and families in the form of a higher child tax credit (the 2018 credit is twice the credit amount in 2017!) along with a new non-refundable credit of $500 for dependents other than children. This new tax law will also eliminate the need for most* people to itemize their deductions. It is estimated that nearly 30% of all tax payers itemize, and under this new tax law they expect that percentage to decrease.
The tax rates don’t just change for individuals and families; corporate tax rates decline as well. In fact, corporate tax rates will drop from a top marginal rate of 35% to a flat 21%. This cut is designed to help small businesses be more competitive in the marketplace. If you report your business profits as personal income on your tax return (LLC, S Corp, or Partnership), you may be able to deduct up to 20% of your business income. There are some restrictions and limitations to this so its best to talk with your trusted financial and tax advisors about how to proceed.For single filers the rates are as follows:
If you do own a business, making an investment that could potentially improve your business- whether that be through productivity or expansion- the act allows you to deduct 100% of the cost of short-lived capital investments for 5 years under Section 168 and Section 179. If you have been considering capital investments in your business, you have a limited period of accelerated expensing. Review IRS Publication 5307 for Individuals and Family and Publication 5318 for Businesses for more information regarding Tax Cuts and Jobs Act changes to the tax code.
*Some restrictions for itemized deductions will still apply-- For more information on single and joint filing deductions and so much more click on the link here for more information.
Disclosure: This analysis is based on information obtained from sources deemed to be reliable. Triton makes no representations or warranties regarding the accuracy or completeness of information used in this analysis. The information presented is general and educational in nature without regard to individual facts and circumstances of a particular person and may not be relied upon as individualized advice. Please consult your financial and tax advisors to review your individual facts and circumstances for individual advice. Intuit Turbotax is in no way affiliated with Triton Wealth Advsiors, LLC.
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