What to Expect When Filing 2018 Taxes

Income Tax

As the April 15th 2019 deadline approaches for filing 2018 tax returns, there are several changes that will affect your tax refund,  what you need to pay, or what you claim. These changes listed below are only some of those instituted, and their effect on each situation may differ. Please note I am not a tax advisor. I suggest you consult with your tax advisor on questions related to your specific circumstances.

The first change to discuss is the downward adjustment of tax brackets for most filers. The good thing about this change is that you can expect to owe less in federal taxes. The potential negative is that sometimes if you did not adjust your federal withholding early in the year you may owe more than you expect if you did not pay enough under the new rules.

The second change to discuss is that the Standard Deduction was almost doubled making it an attractive option to use for many filers. Using the standard deduction eliminates the need for you to itemize expenses. As a trade off some deductions that could be claimed in the past were eliminated or reduced.

Changes to deductions for 2018:

  • State and local tax deductions are capped at $5,000 for single filers and $10,000 for joint filing.
  • Mortgage Loan Deduction… if the loan origination date is after December 15, 2017 the interest deduction amount will be calculated on a maximum loan amount of $375,000 for single filers and $750,000 joint filers.
  • Home equity lines of credit have to be used to buy, build or improve either a primary home, or secondary home in order for the interest to be deductible. This will be a negative for those who have used their home equity line of credit for things other than direct home expenses and they wish to claim the deduction for the interest expense.
  • Charitable contributions of cash deduction amounts have risen from 50% to 60% of adjusted gross income. This is a positive for people who make large contributions to charity.
  • Some miscellaneous expenses are no longer deductible, and that is a negative for many people. If you are a business owner some of those expenses may still be deductible.

If you have not filed your taxes yet, you should be ready to see changes that you are not used to seeing, and hopefully more money will be returned to you than expected due to the changes.