Tax filing can be a confusing and complicated debacle at the best of times, but with the effects of the new 2019 Republican Tax Law beginning to reverberate around the country, things just may have gotten out of hand. With some tax breaks having been scrapped or capped, and others being introduced or expanded upon, it can be tough to stay on top of things. So, here is the first part of a brief guide that attempts to answer some of the most common tax queries:
- My tax bill didn’t decrease as I had anticipated, why?
Tax bills for folks living in states where taxes are higher, such as New York, New Jersey or California, may have increased due a state and local tax deduction (SALT) having been capped at $10,000. Income taxes are included in this, as are real estate taxes.
If you live in New York, for example, and your state and city taxes add up to almost 10% of your income, then you lose the ability to deduct any of your property taxes because your other taxes already exceed the $10,000 limit.
- My tax return is showing a minimal refund or amount due, why?
Employers were given guidance by the IRS last year as to how tax withholdings from pay checks should now work: decreases were suggested to reflect the tax cut of the 2017 law, and it should have given most employees a bigger pay check. However, if you were an employer receiving the check, there’s a strong likelihood that you didn’t spot the increase, as it would have been reflected in your 2018 pay checks.
- Are there any changes to deductions and credits? If so, do I lose out or can I still claim?
Here are a few of the most popular deductions and credits, along with their 2019 changes:
Dependant exemption: Previously, families could claim a $4,050 exemption for every child that qualifies, but that exemption is no longer valid. Now, if you have a child under the age of 17, you may qualify for the child tax credit that has been raised from $1,000 to $2,000 per child.
The credit has begun to phase out at $400,000 in income for joint filers and $200,000 for individuals, and there is a new credit for other dependents (including elderly parents or children over 17) of $500.
Mortgage interest: For those who itemize their return and have taken out a loan after December 15th,2017 the interest paid can be deducted on the first $750,000 in mortgage indebtedness; older loans are grandfathered.
Unreimbursed employee expenses: for business expenses not reimbursed by employers for their employees, such as classes or seminars, there are no further deductions.
Tax prep fees: if you itemized your return and used the services of a tax preparer, or tax software, you used to be able to deduct those costs, but this is now only possible if you’re self-employed.
More information can be found in part two of this article, but for more detailed, accurate and up to date guidance about current changes to tax laws, please seek help from a professional tax service.