New tax law changes may show up soon in your paycheck
Changes may appear as soon as February
SAN ANTONIO – You might see the effects of the federal tax overhaul in your paycheck as early as February, experts said.
What's important to know is that there are still seven federal tax brackets.
The most people will pay in federal income tax for the top bracket is 37 percent, down from 39.6 percent. The bottom bracket remains at 10 percent.
The income ranges vary for each bracket, but with the lowering of the cap, there is a trickle-down effect, which means the average middle-income family could see a decrease in their take-home pay.
To figure out approximately how much may be deducted from your paycheck, your best bet is to head to the IRS website, which has a tax-withholding calculator, but it hasn't been updated yet. You can also visit a tax professional.
The majority of the other changes concerning deductions and exemptions will begin with the filing of 2018 taxes next year.
Here are some things you can look for in planning for the 2018 return.
A big change is you will not be able to deduct moving expenses for a job you take in 2018, with one key exception.
"Under the new tax reform that [deducting moving expenses] will no longer be allowed, with the exception of certain members of the armed forces. So, if you're moving due to a permanent change of station, then there's still some ability to deduct those expenses," said Mikel Van Cleve, USAA advice director.
There is also now a limit on the mortgage interest deduction at $750,000, which is down from $1 million.
If you took out a home equity loan for indebtedness, like to pay off credit cards, you could deduct as much as $100,000. Now, it's zero.
There is also now a cap of $10,000 for the deduction of the cumulative amount of your state and local income taxes, sales tax and property tax.
Be aware that the standard deductions are higher, so there may be no point in itemizing come tax time 2019.
A married couple filling jointly will have a standard deduction of $24,000, about double of what it used to be.
Personal exemptions for each person in a household, like children and spouses, will no longer be allowed.
There is some potential good news for parents though.
"One good news piece I would say is the child tax credit has increased, so that's now $2,000 per child [under the age of 17], which a credit is going to reduce your tax bill, where as a deduction will just reduce your taxable income," Van Cleve said. "Also, the income level for that child tax credit has increased considerably on the phase out, so if you made too much money before, you may not get the child tax credit at all, that income level has increased, so now you may actually be eligible and get a larger amount."
For qualifying dependents age 17 and older, there is a new $500 dependent tax credit.
Van Cleve has some simple advice for people who don't understand the new tax law.
"The big thing with all the changes is, you know, make sure you're consulting your tax professional, (so) you have a good idea of how these changes are going to impact your specific situation, and definitely go and, once the IRS has their website updated, review your tax withholdings. That way you don't have a big surprise at the end of the year," he said.
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