Earlier this year, the Tax Cuts and Jobs Act (TCJA) was signed into law and quickly began taking effect. As many of you may know, the new tax law brings significant changes to the future tax landscape, many of which differ for each of us. Despite these differences, there are some commonalities found within the tax law, specifically for parents, caregivers, businesses, and seniors.
Let us share with you some reasons for how the new tax bill may be of benefit to you and your loved ones.
Many taxpayers who previously itemized deductions may now claim the new standard deduction instead. The TCJA increases the standard deduction to $12,000 for individuals, $18,000 for head of household, and $24,000 for married couples filing jointly. Further, taxpayers can still enjoy various tax incentives, such as deductions for higher education, mortgage interest, and retirement.
For 2018, Americans with high medical expenses will remain able to deduct them, so long as the expenses exceed 7.5 percent of a person’s annual gross income. In 2019, however, under the new tax law, the threshold will increase to 10 percent of an individual’s annual gross income. Premiums and out-of-pocket expenses that were not paid with pre-tax dollars will be included.
The new tax law has left the popular retirement savings plan intact despite a suggestion during session to cap the annual amount a person can put in his or her 401k retirement savings account at $2,400. Hard-working Americans can still put as much as $18,000 per year into their retirement savings accounts without paying any taxes upfront.
The TCJA increases the maximum child tax credit (CTC) through 2025, from $1,000 to $1,300 per child. This means that taxpayers who do not owe any tax dollars can still claim a credit up to $1,400. On top of that, each parent and/or non-child dependent is now eligible for a $300 credit. This credit is especially important caregivers as the credit can be claimed for a child who is still reliant on you over the age of 18 or a senior family member you are caring for.
Many parents will be pleased to learn that the scope of 529 accounts has broadened. 529 accounts were previously limited to college savings, however, with the implementation of the new tax law, 529 accounts can now be used for up to $10,000 in private and religious K-12 school tuition.
These are just some of the reasons how the TCJA can help you and your family. We understand how challenging taxes can be, especially in light of the new changes. If you are ready to discuss your estate planning or would like more information on how the TCJA may impact you, do not hesitate to contact our firm and schedule a meeting.