Even though an overwhelming number of Americans opposed the tax reform bill, the Republican-controlled House and Congress passed sweeping changes to the U.S. tax code. Many of those changes will directly affect you and your families for the next decade. Here are the key things that will help or haunt your tax season.
The ACA individual mandate repeal
In one of the sneakiest moves ever, the neo-conservatives got what they wanted in repealing one of the key elements of the Affordable Care Act. Essentially they hid an earmark that repeals the individual mandate set forth in the ACA. What that translates to is 13 million people no longer being covered by health insurance.
This does not mean that the ACA has been repealed, just the individual mandate. You will still have to pay a steep fine for not having health insurance in 2018. However, the turmoil that the repeal will have on the individual markets will definitely affect how or if people will get insurance.
You will be in a different tax bracket
Unless you make less than $9,526, then you will get a tax break on your federal taxes. Business Insider has created a useful infographic to show you how much of change that will be in the new year. On average, the tax break will amount to around 2.5% in all brackets.
This doesn’t account for all the exemptions that were made into law. In the long term that significant decrease in federally taxed income cancels itself out without those deductions. In some cases, the amount they pay in taxes will actually rise even though your tax bracket changed.
Elimination of personal exemption
The standard deduction of a family or single filer has doubled, which sounds nice. However, the personal exemption, which allowed you to deduct $4,050.00 for each member of your family, has been eliminated. Without the personal exemption, families with 2 or more children will not benefit at all. This exemption primarily aided the middle class.
No more itemized deductions
Everything that you normally deducted from your taxes each year will no longer be able to be deducted. Things like loan interest, alimony, property taxes, or personal expenses for work like when a teacher buys supplies for the classroom. Your deduction from state taxes also caps off at $10,000.
Corporations benefits will go to stockholders, not workers
One of the big promises that the Republicans have been touting is that by cutting the corporate tax rate from 35%, down to 21% that the companies will reinvest and create more jobs with the extra cash. Regardless of what Republicans believe, many CEOs say the extra cash will be either redistributed to shareholders or used to by back stock in the company. At a meeting of CEOs, the crowd was asked by a show of hands how many people would reinvest the money into job creation and only a couple hands went up in the crowd.
Only some interest rate deductions will remain
It limits the amount interest you can deduct on mortgages to $750,000 in the value of the loan. If you have a line of credit opened on the home, the interest garnered from that can no longer be deducted.
When it comes to students, you can still deduct all of the interest on your student loans.
Expansion of medical cost deductions
Medical costs can easily break a bank account, even if you have health insurance. Under the tax reform bill, the medical expenses deduction will be expanded to cover up to 7.5% of the total income in health care expenses. This will be effective from 2017 to 2018. Before, the total expense had to be 10% or more of the total income.
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