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5 Tax Reform Changes to Know
Before Filing Your 2018 Tax Return

Tax Day is just a few weeks away. Some of us are waiting for their 1099s and hope to get them all by the end of February. A few have already gathered their papers and are trying to make heads or tails of the tax reform. Others, like me, just gave up the I-got-it pretense and hired an accountant. Our colleague, Katty Kauffman, thought it would be a good idea to share what I learned, and I thought it should come directly from the source.

I work with Vix-Tax, and I asked Vic to shed some light on how the income tax reform can impact freelancers.  I am sharing his response below, with his permission.

Tax reform affects every person’s tax return in 2018.

Before you file this tax season, here’s what you need to know about the tax law adjustments to be prepared.

1. The tax rates changed for everyone.

The tax rates you previously knew are no more. Almost every rate has changed in 2018. In fact, the entire bracket for each filing status was adjusted. Here’s what they look like now:

Tax rate 2018 – Single Filer 2018 – Joint Filer 2018 – Married
Filing Separate
2018 – Head of
Household
10% $0 to $9,525 $0 to $19,050 $0 to $9,525 $0 to $13,600
12% $9,526 to $38,700 $19,051 to $77,400 $9,526 to $38,700 $13,601 to $51,800
22% $38,701 to $82,500 $77,401 to $165,000 $38,701 to $82,500 $51,801 to $82,500
24% $82,501 to $157,500 $165,001 to $315,000 $82,501 to $157,500 $82,501 to $157,500
32% $157,501 to $200,000 $315,001 to $400,000 $157,501 to $200,000 $157,501 to $200,000
35% $200,001 to $500,000 $400,001 to $600,000 $200,001 to $300,000 $200,001 to $500,000
37% $500,001 or more $600,001 or more $300,001 or more $500,001 or more

 

2. The standard deduction nearly doubled.

Another major tax reform change included increasing the standard deduction for every filing status. The standard deduction is a pre-set dollar amount that reduces your taxable income. When you file your tax return, you can choose to claim the standard deduction or itemize your deductions.

Filing Status Standard Deduction
Single $12,000
Married Filing Jointly
& Surviving Spouse
$24,000
Married Filing Separately $12,000
Head of Household $18,000

 

3. Miscellaneous deductions were suspended.

If you itemized deductions in the past, don’t expect to deduct miscellaneous expenses this year. Any miscellaneous itemized deductions that exceeded two percent of your adjusted gross income (AGI) were suspended as part of the tax reform. That includes expenses like unreimbursed employee expenses, safe deposit fees, investment management fees, and union dues.

4. Personal deductions were eliminated.

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You can no longer claim a personal exemption deduction for yourself, your spouse, or any dependents. That means you can’t reduce your taxable income using the personal exemption like you could in previous years. In 2017, the personal exemption was $4,050.

5. The State and Local Tax deduction are capped at $10,000

Most state and local income taxes are still deductible as itemized deductions. However, the amount you can deduct in one year is now capped at $10,000.  That means you can deduct up to $10,000 in property and income tax or sales tax on Schedule A. Previously, the deduction was unlimited.

Single filers and those married filing jointly are both subject to the $10,000 limit. The cap for a married person filing separately is $5,000.

That looks very complete, but I still had one question: Am I going to be able to deduct my home-office space under the new tax code? I heard that was no longer allowed. Vic made things clear: “Yes. As long as you are self-employed, the home-office deduction is still available to you. On Form 8829, prorate by square footage: rent, utilities, maintenance, and other residence related expenses. The deduction was suspended for employees.” Good to know.

Photo credit: 401kcalculator.org


To learn more about Vic’s love affair with numbers, you may visit his LinkedIn profile and read the testimonials. Vic Palumbos, is the Senior Manager at Grapevine Management, and you can reach him at VIX-Tax@yahoo.com.

8 Comments
  • David Mintz
    Posted at 04:19h, 13 January Reply

    You keep referring to it as tax “reform.” Why?

    • Gio
      Posted at 13:16h, 13 January Reply

      Because the changes are the result of a tax reform.

  • Carmen Saenz
    Posted at 06:14h, 13 January Reply

    Thanks, Gio! Very useful information.

  • Konnie Garrido
    Posted at 15:33h, 13 January Reply

    As a freelancer, I don’t receive W-2s. I get 1099s : -)

    • Observer Editor
      Posted at 16:11h, 13 January Reply

      You are absolutely right! DUH!! The text has been edited. Thank you, Konnie!

  • Emily Ortiz Alfonso
    Posted at 15:29h, 14 January Reply

    Gio thanks. I was wondering why the standard deduction was so much and why I couldn’t find personal deductions. I use an accountant for our S Corp.

    • Gio
      Posted at 15:58h, 14 January Reply

      My pleasure. We all need this information and I am glad Katty asked for it.

  • Christina Courtright
    Posted at 17:48h, 16 January Reply

    I’m surprised it doesn’t say anything about the 20% pass-through deduction for sole proprietors and small businesses, which would cover many of us.
    https://www.irs.gov/newsroom/irs-several-tax-law-changes-may-affect-bottom-line-of-many-business-owners.
    I’m a sole proprietor and my tax professional told me last year that I would probably be eligible for some nice savings. Not saying it’s going to happen, but… be sure to study the options.

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