What you need to know about the new tax law
MONTGOMERY, AL (WSFA) - If you’re thinking about waiting to file your taxes this year, think again. This is the first tax season under the Tax Cuts and Job Acts, which was passed by Congress in 2017.
It’s the biggest tax law change since 1996, and a recent study done by NerdWallet found that the change is confusing many. NerdWallet’s study showed that half of people simply do not understand how the new law will impact their taxes.
Lyvonnia Poppell, tax principal for Jackson Thornton, an accounting firm in Montgomery, said that since the new tax law went into effect, she’s received numerous phone calls from clients and the public asking for help with their taxes.
“We have had some more phone calls," Poppell said. “With all the different changes it was already going to be difficult this tax season."
According to Poppell, one of the biggest changes with the new law is in the standard deduction category. For single filers, the standard deduction went from $6,350 to $12,000.
“We increased our standard deduction, so if you were married filing joint from $12,000 to $24,000, but you had two people, they had about an $8,000 personal exemption and so now that is zero because they took away the personal exemptions," Poppell said. "Even though they doubled the child tax credit, they also took away the personal exemption which is what they gave you basically about $4,000 for each dependent as a deduction, whereas child tax credit is actually a credit against your tax, so it’s almost kind of like money.”
You also will not be able to deduct business expenses that were not reimbursed.
“They’ve taken away your miscellaneous job expenses so that you can’t take those anymore, and so there’s some give and take on either side, so those are really the big changes that people need to watch out for," Poppell said.
Some income tax rates were lowered and there were also changes made to tax brackets. All tax rates for every tax bracket, except the lowest bracket, were lowered, with the top tax rate now at 37 percent.
Keep in mind that the impact of the changes, such as standard deductions, personal exemptions and itemization will be different for everyone, and that it all depends on your household income and marital status.
Poppell said that if you are confused with how to file your taxes this year, it’s best to contact a tax preparer or accountant.
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