What You Need to Know About the New Tax Bill

President Trump signed a massive tax reform bill in December. The bill is the biggest change to tax law in 30 years, and it gets complicated. Now that we’re in the middle of the 2018 tax season, here are some things you should know about the new bill.

The Bill Went into Effect January 2018

However, this will not impact the taxes you file this April from 2017. Instead, you should be seeing changes on your paycheck starting this month. You should see an increase in take-home pay due to the expected decrease in income tax rates. You’ll see all other tax changes from this during next tax season – when you file your 2018 taxes.

You Will No Longer be Required to Pay a Penalty for Obamacare

Under The Affordable Care Act (also known as Obamacare) all Americans were required to receive insurance through their employer or buy it on the market, or risk paying 2.5 percent of their household income or $695 per adult and $347.50 per child under 18 – whichever amount is higher. The new bill eliminates that measure, and it starts this year.

Your Tax Rate May Have Changed

While the new law maintains seven tax brackets, the percentage rates for each bracket have changed, in addition to the income ranges, which saw increases.

The highest tax rate for single taxpayers with an income threshold of $500,000 and to married couples earning more than $600,000 now has a rate of 37 percent instead of 39 percent. In addition, that same range previously kicked in for singles earning $418,401 and for married couples earning $470,701.

You’ll Still be able to Take a Standard Deduction

In his plan, the president nearly doubled the amount of money eligible for standard deduction. The Trump tax plan increases the standard deduction to $12,000 for individuals and $24,000 for married couples.

That’s an increase from $6,350 and $12,700, respectively.

For more legal advice, tips and tricks this tax season, contact Smith, Paulson, O’Donnell & Erickson. We’re a firm for individuals, families, and businesses, made up of dedicated, experienced professionals ready to advocate for you.