How will my taxes be different as the Tax Reform takes affect this year? Joe, Verona WI
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How will my taxes be different as the Tax Reform takes affect this year?
The Tax Cuts and Jobs Act was passed to end of December take effect in 2018. My aim is to give you a super simple overview with notes on when a deeper look makes sense.
Really, the name says it all, Tax Cuts and Job Act. The largest cut in this reform is for corporations, giving them a 21% flat tax. The highest rate before, which many corporations paid was 35%. The goal is to keep American businesses here in American and hence, create more jobs. The rest of the tax cuts, in my opinion, are simply an attempt to make the majority of American’s happy.
Here’s how it breaks down:
They kept seven tax brackets but reduced some of the rates (between 1-4%) and raise the income levels in some of the brackets. They eliminated the personal exemption and cut some deductions for mortgage interest (for those making a purchase 2018 and beyond for over $750,000 for a couple or $375,000 single) and also limited deductions on state and local taxes ($10,000 is the max for a couple and $5000 for singles), but they doubled the standard deduction. Depending on your income and deductions, you will see a slight decrease or increase but nothing substantial. (Note, some changes to special farm depreciation and deductions 2018 going forward. Consult with your tax professional to see if those will affect you)
When you hear that taxes will be simpler, it is the assumption that more people will tax the standard deduction instead of itemizing.
Business owners, those with small and mid-size companies, especially those in the service industries such as medical professionals, advisors, and consultants, operating as a pass-through entity (LLC, S Corp, Partnership…) will not benefit from any of the reduced corporate rates. Other business owners not in the service industry with incomes over $207,500 single or $415,000 married will see little to no benefit in the reduced corporate rates. This tax reform will not provide much relief for these business owners, in fact, some may see a slight increase. If this is you, it is highly important to work not just with a CPA but a team of specialist to look at specialized tax incentives available to you as well as how to set up an efficient tax and marketing plan. There are plenty of tax codes you can take advantage off to reduce your taxes when proper planning is in place.
For more information, to request a free copy of our book or to submit your questions, go to www.CreatingYourDreamRetirement.com
Michelle Bertram and Beverly Bertram are financial advisors living in Mineral Point WI and serving the surrounding communities. Michelle Bertram does financial planning for retirees along with business consulting. Beverly Bertram specializes in retirement planning and income planning for her clients. Michelle Bertram and Beverly Bertram are authors of the book, Creating You DREAM Retirement and creators of the DREAM Retirement Process.
Serving Madison WI, Verona WI, Mount Horeb WI, Barneveld WI, Dodgeville WI, Dubuque IA, Platteville WI, Lancaster WI, Cuba City WI, Fennimore WI, Darlington WI, Monroe WI, Spring Green WI, Black Earth WI and beyond.