Most taxpayers are at least somewhat familiar with the Tax Cuts and Jobs Act, or TCJA, which was first signed into law in 2017 and enacted many changes, most of which were positive for the vast majority of taxpayers. Originally, the law led to reduced statutory taxes for most. However, recent changes in the tax law are also having an effect, and many people are concerned this time around, the act they once relied on could actually hurt them. How it will affect you will depend on several different factors, but it’s important to have an idea of where you stand.
The Changes
So, you may be wondering, what features of the TCJA have changed?
For one thing, the standard deduction has doubled for all filing statuses, while personal exemptions have been eliminated at the federal level. For homeowners, the home mortgage interest deduction has changed, with only mortgage debts of up to $750,000, instead of the previous $1,000,000, being eligible. There’s also been an increase in the child tax credit, as well as various other changes that may impact you.
Low-Income and Middle Class Earners
The good news is
that, in most cases, low-income and middle class earners shouldn’t fare too
badly come tax time, providing they do their taxes correctly and in a way that
benefits them, ideally with the help of a professional.
Many of these
individuals may find themselves in lower tax brackets due to the changed
parameters. However, circumstances will vary from one individual to the next.
High Earners
The wealthy
actually seem to fare the best under the new regulations, which is one of the
reasons many people take issue with them.
With many of
these earners also being able to fall into a lower tax bracket, that could mean
facing less taxation. Plus, the TCJA allows for an increased $11.4 million
estate tax exemption, which allows the wealthy to pass on their wealth
virtually tax-free.
While there’s no
guarantee that these changes will be permanent, it’s best not to get upset, no
matter how the TCJA’s new terms affect you. The right course of action, no
matter what, is to work closely with a tax professional to increase any
benefits coming your way as a result of the changes and to mitigate any
potential damage.