Tax season is upon us, and with it comes a new tax code that could have a significant impact on your finances. The Tax Cuts and Jobs Act of 2017, which was signed into law in December 2017, is the most sweeping tax reform in decades. It includes changes to individual and corporate tax rates, deductions, and credits, as well as other provisions that could affect your taxes.
For individuals, the new tax code lowers the top marginal tax rate from 39.6% to 37%. It also increases the standard deduction to $12,000 for single filers and $24,000 for married couples filing jointly. This means that more of your income will be taxed at the lower rate, potentially resulting in a lower tax bill.
The new tax code also eliminates or limits certain deductions. For example, the deduction for state and local taxes (SALT) is now capped at $10,000. This could be a significant hit for taxpayers in high-tax states like New York and California. Additionally, the new tax code eliminates the personal exemption, which was previously $4,050 per person.
The new tax code also expands the child tax credit from $1,000 to $2,000 per child. This could be a significant benefit for families with children. Additionally, the new tax code creates a new $500 credit for non-child dependents, such as elderly parents or adult children.
For businesses, the new tax code lowers the corporate tax rate from 35% to 21%. This could result in more money for businesses to invest in their operations, which could lead to job growth and higher wages. Additionally, the new tax code allows businesses to immediately write off the full cost of certain investments, such as equipment and machinery. This could be a significant benefit for businesses that are looking to expand or upgrade their operations.
Overall, the new tax code could have a significant impact on your taxes. It is important to understand how the new tax code will affect you so that you can make the most of the changes. If you have any questions, it is best to consult a tax professional to ensure that you are taking full advantage of the new tax code.