Taxes aren’t sexy, but paying less of them is always attractive if you ask us. As the 2019 deadline approaches, tax payers will feel the effects of last year’s tax reform for the very first time. It’s the largest tax reform legislation passed by congress in decades, so change is inevitable. For those still needing to file, this may serve as a reminder to take advantage of those prior year contributions, fast.
Let’s start by highlighting some of the major tax changes.
5 Major Changes to 2018 Tax Filing:
- No more personal exemption. Once upon a time, qualified tax payers could deduct $4,050 for themselves and each of their dependents. For tax year 2018, this is a thing of the past.
- The standard deduction went up. A lot. If you are married, filing jointly/surviving spouse, your standard deduction is $24,000. For heads of households it’s $18,000. And, for single or married filing separately it’s $12,000. There are additional standard deductions if you are over 65 or blind and depends on your filing status.
- Forget the 1040A or 1040EZ form. These forms have been replaced by a newly redesigned Form 1040.
- The child tax credit increases from $1000 to $2000 per qualifying child under the age of 17. Eligibility for the credit has not changed.
- Most tax rates have been reduced. The 2018 tax rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%.
If you’ve already filed your taxes, you’re ahead of most people. If you have yet to send your tax preparer the required forms, make sure you are taking advantage of tax-deductible contributions to your traditional IRA. There’s still time! Just remember, anyone can contribute $5,500 ($6,500 if you are over 50) to their traditional IRA each year, but it will be subject to income limitations and whether you or your spouse participate in a retirement plan at work when determining if it is deductible. As for a Roth, there are contribution limits based on your modified adjusted gross income (AGI).
As usual, the filing deadline is April 15, which is also the last day to make a 2018 IRA contribution to your traditional or Roth (Keogh and SEP contributions can be made as late as October 15, 2019, if you file for an extension on your taxes by April 15).
As for your employer sponsored 401k or 403b, contributions were required to be made by December 31, 2018.
-Cory M. Norpel
About the Author: A second-generation Arizonan, Cory Norpel, Chastain’s Operations Director, graduated cum laude from the Walter Cronkite School of Journalism and Mass Communication at Arizona State University. A true people person, Cory loves to work with our clients and partners to ensure they receive superior service. Cory’s experience in both journalism and the medical field demonstrate her excellent attention to detail.