The tax code usually changes at least a little from year to year. In 2018, however, there are a few major changes that should definitely be on your radar.
New Tax Brackets
In 2018, as in 2017, there are seven tax brackets. However, the details (income parameters and tax rates) have changed. The IRS will publish the finalized brackets online: www.irs.gov
These changes mean the rate at which your income is taxed may be different than before. Therefore, it could be worth updating your W-4 at the start of tax year 2018 to adjust your payroll withholdings. That way, you won’t under- or over-pay taxes throughout the year.
Updated Standard Deduction
One of the other major changes to the tax code is an update to the standard deduction. You can either decide to itemize your deductions (i.e. individually list every deductible expense you incur during the year) or take the standard deduction (a fixed deduction that all taxpayers are eligible to take) on your taxes. People typically itemize deductions only if that amount is greater than the standard deduction.
Starting in 2018, however, the standard deduction will be significantly higher than it has been in the past. In 2017 the standard deduction was $6,350 (single) or $12,700 (married, filing jointly). Now, however, it is $12,000 (single) or $24,000 (married, filing jointly). That’s a substantial increase!
Many taxpayers may find that taking the standard deduction when they file their 2018 taxes is more beneficial than itemizing. Knowing about this change at the start of the tax year will help make informed decisions about your spending throughout the year, and about how (and if) you’re tracking deductible expenses.
The team at Tax Resolution St. Louis is here to help you arm yourself with information so that you can take charge of your financial situation. Don’t wait until you file to start thinking about your 2018 taxes. Let our tax pros in St. Louis help you start the new year off right!