The next tax season is coming, and you need to get ready. If you did not own any taxes in previous years does not mean you won’t need to prepare. Many rules are going to change under the New Tax Law. So, there we wanted to tell you about some of the impacts. In case you need to calculate the taxes, you can use a Free Income Tax Calculator for it. It will save you a lot of time. Now, let’s see the impacts.
The Impact of Lower Taxes Rate
The first impact of lower taxes is related to lower tax reduces. When the tax rate is lowered, the ability to withhold the money from your paycheck increases. The tax rate could reduce from one to four percent, meaning more paycheck into your account. How it will impact tax refund, it is a question we are still exploring. You can ask your employers for an update W-4 form or withhold it to increase your Tax Refund. Now, let’s move onto the second impact.
The Personal and Dependent Exemptions
With new tax reform, The personal and dependent exemption has been eliminated. It means you will have to write a few write-offs than before.
The impact on Child Tax Credit
If you are married and having kids are planning to have kids, then this is utterly important for you. Do you know under the tax reform, The child Tax Calculator is increased from $1000 to $2000 per child. If you have dependents other than children, then you will receive $500 extra for it. It is called Other Dependent Credit ( OCD). Then there is an increase in the income threshold for married couples. It has been increased from $110,000 to $400,000. If you want the benefits of the child tax credit, your kids need to be under 17.
Where Did Tax Deductions Go
This is something which will surprise you. To make the process more comfortable, in the new tax reforms, various tax breaks have been eliminated. For example, The job search expenses, investment expenses, tax preparation fees and reimbursed work expenses are such eliminations. The moving expenses are also reduced unless you are inactive military.
What if you are Homeowner
Now, if you are planning to buy a new home shortly, the tax reform will have an impact on you. So, you need to read about it, whether here or anywhere. The standard deduction is doubled while itemized deductions have been put on your taxes. In the past, you could get to $10,000 on the sales tax deduction, but as we said, now it is not possible. So, whether you should take a standard deduction or itemized deduction, calculate it very carefully before making a decision. The new rules say the debt for mortgaging is reduced to $750,000 from $1,000,000. So, if you are buying a property in a high estate area, you might need to reconsider your decision.
What things should you do?
Now, the question comes, what preparations you need to make for smooth tax filing. Well, first use a tax calculator to determine how it will affect your Tax Refund. The other thing you can do is to reduce your taxable income somehow. You can begin by investing in an IRA or 401K. If there is any student loan you are paying, they will help as well in decreasing your taxable income. You should begin to gather all the documents you are going to need for filing a tax return. Because if you do not have them at the right moment, you will make mistakes.