Our Guide to Saving on Your 2018 Taxes
Supporters of the Tax Cuts and Jobs Act said the new law would cut taxes for millions of Americans and shrink their returns to the size of a postcard, drastically reducing the amount of time required to file.
The tax overhaul will indeed lower taxes for many taxpayers, but the upcoming filing season--the first since the tax law took effect--could introduce new headaches, complications and unexpected costs. Deductions and other tax breaks that taxpayers have claimed for years have been capped or eliminated. Self-employed people will probably need to hire an accountant to navigate a new money-saving tax break. And that streamlined tax return? While the new Form 1040 is shorter than the old one, it comes with 117 pages of instructions.
The lengthy instruction manual is a nonissue for most taxpayers because the majority use tax-preparation software or hire a tax preparer. But even if you outsource your taxes, filing your 2018 return will probably require extra effort on your part.
Big changes
The tax overhaul lowered tax rates across the board and expanded income thresholds, so more of your income will be taxed at the new, lower rates. For example, the top rate was reduced to 37% from 39.6%, and for a married couple, it doesn't kick in until their taxable income exceeds $600,000. In 2017, that couple would have paid the top rate once their taxable income exceeded $470,700.
But the most-significant changes affect personal exemptions and the standard deduction. In 2017, you could take a deduction of $4,050 for each personal exemption claimed on your tax return (one for single returns and two for joint returns, plus one for each dependent). Personal exemptions were eliminated in favor of a larger standard deduction and an expanded child tax credit. The child tax credit, worth $1,000 for each child under 17 in 2017, is now worth $2,000 per child (a credit is a dollar-for-dollar reduction in your tax bill). The tax law also expanded the
