Happy New Year! As 2018 gets underway, the team at Taxation Solutions, Inc. wants to make sure you’re up to speed with some of the major tax code changes that are coming for the 2018 tax year.
New Tax Brackets
A tax bracket is a range of income that’s taxed at a certain rate. For 2018, there are seven tax brackets, each taxed according to a progressive taxation system.
The important thing to note about the 2018 brackets is that they’re slightly different from previous years. Overall, the 2018 tax rates have been brought down. Many people may find they’re in a different tax bracket than before, meaning their income will be taxed at a different rate.
In order to make a solid financial plan for 2018, make sure you know where your income falls within these new tax brackets. The team at Taxation Solutions, Inc. will be happy to assist if you need help interpreting these changes!
New Standard Deduction
Along with the changes in tax rates, 2018 also ushers in vastly changed standard deductions. In 2017, the standard deduction was $6,350 for single taxpayers and $12,700 for married taxpayers filing jointly. Those amounts have almost doubled for 2018. You can now take a standard deduction of $12,000 (single) or $24,000 (married, filing jointly).
What Do These Changes Mean?
These changes mean your tax return will look very different next year than it has in years past! While these changes won’t affect your tax return until next year (2018 taxes will be filed in 2019), it’s important to take them into consideration now so you can plan and make informed financial decisions today.
For example, the new tax brackets may affect your take-home pay. You may need to file a new form W-4 to adjust your withholdings so you don’t under- or over-pay taxes throughout the year.
The shift to higher standard deduction comes hand-in-hand with changes to itemized deductions. Since the standard deduction is higher than in past years, there are fewer expenses that you can itemize. Sorting out which route you want to take (standard or itemized) at the start of the year will save time (and maybe money!) down the line.
To fully understand how these tax code changes will affect your financial picture, we suggest talking with a tax pro like Taxation Solutions, Inc. We are your local source for tax assistance in Virginia Beach, and we’ll be happy to help you navigate the nuances of the tax code. Call us today to set up an appointment so you can take charge of your financial future in 2018!