It is going to be a while before you file your 2018 taxes. However, it’s important to know about recent changes to the tax code now so that you and your family can make informed financial planning decisions in the immediate and long-term future.
New Tax Brackets
There have been two big changes to the tax code for 2018. The first is a change in tax brackets. There are seven brackets total, which is how many there were before. However, the income range in each bracket is a bit different, and the tax rate is different too.
Overall, tax rates have been lowered. Depending on your income, your tax rate may have come down a lot or a little. In 2017 the highest tax rate was 39.5%. Now, it’s only 37%.
This change won’t necessarily affect everyone, but it could be reflected in your paycheck starting February. That’s why it’s so important to be aware of these events. In order to make a solid financial plan for 2018, you have to know what’s going on tax-wise and where your money is going.
Changes to the Standard Deduction
In addition to changes to the tax brackets, recent tax changes have also introduced a new standard deduction. The new standard deduction amounts are:
- $12,000 (single)
- $24,000 (married, filing jointly)
This is a big jump! The standard deduction in 2017 was only $6,350 (single) or $12,700 (married, filing jointly). In both cases, the deduction has almost doubled.
What Does This Mean for Me?
It’s important to know this information now because it will affect your money management over the year. You may well get more money in your paycheck due to the new tax brackets. But, you won’t be able to itemize your deductions quite as much as in years past. In order to make informed decisions about your finances in 2018, you should definitely get a handle on how these tax changes will affect your specific situation.
If you need guidance understanding tax reform, call the pros at Taxation Solutions, Inc. today. We’re here to help folks in Raleigh understand the tax code and make informed financial decisions. Call us today to find out how we can help!