(Courtesy of SimpliFi retirement planners)
– The new tax code will not affect your 2017 taxes. Everything you’ve heard and read will go into effect this year (2018), so you won’t truly know if it positively or negatively affects you until next year, when you file your 2018 tax return.
– Deductions: Under the new law, no one can take a tax deduction on investment fees, investment expenses, or tax preparation fees.
– Divorced with alimony payments: Those who sign divorce or separation paperwork after December 31, 2018 will no longer be able to report payments on their tax return. Payments will not be deductible to the person who makes the payment, nor will they be included in the income of the person who receives the payment.
-Homeowners: No changes for those with an existing home loan. For new home purchases beginning this year, mortgage interest deduction has been lowered for those taking out large mortgages (over $750,000). Home sellers who make a profit will still be able to exclude up to $500,000 of earnings (or $250,000 for single filers) from capital gains, as long as it’s been their primary home for at least two of the past five years.
– The corporate tax rate dropped to 21% (from 35%). The corporate tax move is geared to make the U.S. a more attractive place to do business. Companies can now “repatriate” overseas cash (send money back to the U.S.) at a tax rate of 15.5% (down from 35%). Apple, for example, announced plans to repatriate the “vast majority” of its $252 billion held overseas. The implications of such moves are hotly debated (paying their fair share of taxes vs. more jobs, a new Apple campus, and the tax revenues of approximately $38 billion).
A combination of lower tax brackets and higher standard deduction may result in lower income taxes for some however the cut may not have a meaningful impact in the total taxes one pays. For example, many deductions will be reduced or completely eliminated, but other factors, such as a higher standard deduction may benefit people who no longer itemize. Please speak with your tax adviser to determine if the changes affect your individual situation.
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