How does the tax reform affect me?

The Tax Cuts and Jobs Act made several changes that could affect your 2018 tax return.

  • What counts as income has not changed. So if something counted as income before, it will also count as income in 2018.
  • There are still seven tax brackets, but the rates changed.
    • The new rates are: 10%, 12%, 22%, 24%, 32%, 35%, 37%
    • The previous were: 10%, 15%, 25%, 28%, 33%, 35%, 39.6%
  • Some credits that have changed:
    • The maximum amount of Child Tax Credit has increased from $1,000 to $2,000. The refundable portion has increased from $1,000 to $1,400.
    • There is a new nonrefundable $500 credit for other dependents who don’t qualify for the Child Tax Credit.
  • There are also some changes to deductions:
    • The Standard Deduction has increased. So people who usually take the Standard Deduction instead of itemizing would have a larger deduction.
    • Many Itemized Deductions have been modified. So many people who usually itemize their deductions may find it more beneficial to take the Standard Deduction.
    • Personal and dependent exemptions are eliminated. Each exemption was a $4,050 deduction in 2017.
    • There’s a new business deduction for up to 20% of qualified business income.

For your 2019 tax return filed in 2020, the individual responsibility payment for not having health insurance will also go away. But you still need to have health insurance for your 2018 tax return.