When Do The Tax Changes Go Into Effect

Revenue enhancement reform imposes the biggest change to the revenue enhancement code since the 1980s. And many people are wondering what'due south changed, how it volition affect them, and what they should do about information technology.

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For most individuals, very footling impacts their 2017 return. Except for the limitations on medical deductions (more on that subsequently), the tax return you file now should be unaffected.

Most of the tax reform changes took result January 1, 2018. That means they will touch on the taxation return you file in 2019.

Here is a quick breakdown of the tax law changes that volition well-nigh likely touch on you and when they go into effect.

Medical expense "floor" reverts back to vii.five percent

Before the Affordable Care Deed (ACA), you could deduct medical expenses with your itemized deductions to the extent that your expenses exceeded vii.5 percentage of your adjusted gross income (AGI). That limitation is called a "floor." Under the ACA, the floor for well-nigh people was raised to 10 pct, making it less likely for them to qualify for a medical deduction.

Under the new tax reform, the flooring drops back downwardly to 7.5 percentage for everyone. That is a retroactive alter to January i, 2017 equally well.

Healthcare mandate repealed – but not in event all the same

If you and your family do not have acceptable health insurance in 2018, and you don't qualify for whatsoever exceptions, you lot may all the same face up the "healthcare mandate" penalty.

Starting with the 2019 revenue enhancement yr, however, the healthcare mandate is repealed. You won't file a tax return with the repealed mandate until 2020.

Tax brackets

Despite talk of fewer tax brackets, the final bill still has vii. Your taxation bracket is the rate you pay on each dollar of taxable income over a certain amount. All but the lowest brackets are slightly lower than the 2017 tax brackets. For example, a single person with $l,000 in taxable income in 2017 was in the 25 percent tax bracket. In 2018, that person falls into the 22 percent taxation bracket.

In addition to the rates existence lower, the income levels for each bracket increased. These rate changes went into effect Jan. 1, 2018.

Standard deductions and personal exemptions

The standard deduction significantly expanded under the new tax law, which is effective for the 2018 tax twelvemonth. In fact, the standard deduction is now so large that many people no longer need to itemize deductions.

The new standard deduction for single filers and those married filing separately is $12,000. Married couples get a $24,000 standard deduction. Taxpayers filing as Head of Household can deduct $18,000. (Proceed in mind all of these numbers volition be indexed for inflation going forward from year to year.)

Personal exemptions are gone as of January 1, 2018. If you or your spouse are historic period 65 or blind, however, you tin can increase your standard deduction by $one,300.

Child Tax Credit

For the and beyond, the Child Tax Credit doubles nether the new law. It increased from $1,000 per kid to $2,000.

More than people volition benefit from the credit, equally well. That's because up to $1,400 of the credit is now refundable for each qualifying kid. Previously, lower-income parents who didn't owe enough in tax to take the full corporeality forfeited any remaining portion of the credit that exceeded the corporeality of tax they owed. Now they will receive upwardly to $1,400 even if that dollar corporeality is more than the tax they owed or had withheld.

The good news for higher-income parents is that they can earn up to $400,000 in 2018 before the child revenue enhancement credit starts to phase out.

Pension

Under the new law, an ex-spouse that pays alimony can no longer deduct that amount on their tax return. It's also not considered taxable income for the person who receives it.

However, this alter does not affect most finalized divorces. Information technology simply applies to divorces that occur after December. 31, 2018. It too affects whatever divorces that are modified subsequently that date, so long equally the modification documents specifically say the new reform changes apply to it.

When does my paycheck show a difference?

If yous are an employee, y'all should run across changes in your income tax withholding, and thus your take-home pay, due to the taxation reform changes. Yous may first to encounter changes in the middle of Feb. 2018 depending on the number of withholdings you claim on Grade West-4. If you see a alter in your paycheck, have the time to review your tax withholding. Use TaxAct's 2018 taxation calculator and W-four Withholding computer available in the products to determine if you're withholding the right amount for your tax situation.

What's next?

No matter what the changes include, if you lot fix your render with TaxAct, you lot tin rest assured the program is up-to-date. Each solution will help you navigate the tax reform changes based on your tax situation for this year and beyond.

More to explore:

Did Taxation Reform Help Me?
5 Revenue enhancement Reform Changes to Know Before Filing Your 2018 Taxation Return
How Tax Reform Changed Deducting Unreimbursed Job Expenses
Tax Reform: What Happened to My Mortgage Interest Deduction?