We will continue to look at more of the 2018 changes to the Tax Code as it applies to families and not just businesses. Some of the ways families are affected by the Tax changes include the following:
Alternative Minimum Tax
This is a strange parallel tax system with a separate set of rules that some taxpayers may get caught in. Inside the Alternative Minimum Tax there is an alternative to the regular tax system that taxpayers earning above a certain amount have to calculate their taxes twice, and pay the higher amount. For years Congress has been promising to do away with the confusing Alternative Minimum Tax, but they have lied to us about many other things.
The complexity of the Alternative Minimum Tax is beyond what we will go into here.
Standard Deduction
The Standard Deduction or the amount that you can deduct against your income, has gone up. It basically doubled for many people. It is $12,000.00 for a single taxpayer, $18,000.00 for head of household, and $24,000.00 for married joint filers.
Additional – Aged or Blind + $1,300.00
Personal Exemption
The offset to the increased Standard Deduction is that the Personal Exemption disappeared. This amount could be deducted from your income for yourself and most dependents that were claimed on your return. Previously, you got a $4,050.00 per person personal exemption, which meant that a married couple with two (2) dependents could receive a Personal Exemption of $16,200.00.
Under the new Tax Code that Personal Exemption has been eliminated. Depending on your personal situation, the Personal Exemption may have been a better number for you than the new Standard Deduction, so some families may lose an important tax break.
Child Tax Credit – Credit more valuable than a deduction.
It use to be that taxpayers could receive up to $1,000.00 per child, under seventeen (17) that a parent claimed as a dependent. Now that credit is up to $2,000.00 per child. Again, this is for children under the age of seventeen (17) who are dependents.
For those of you who have returning adult children moving back into your home that are in their twenties and thirties, we can only tell you that we will pray for you.
Alimony.
Alimony has been IRS deductible for the Payor and reportable income for the Recipient. For Separation Agreements and Court Orders entered after December 31, 2018, (or if modified and referring to TCJA tax treatment) shall not be deductible or reportable as income. In other words it is still a taxable event in 2018, but not thereafter.
Property division in a divorce and a child support are still not treated as income or deductible to Payor or Recipient.
At the Law Firm of Steven Andrew Jackson, Attorney and Counsellor at Law, we have helped hundreds of families protect themselves and their loved ones, avoid Estate Taxes and Probate Costs, and keep their Estate Plans current with the law through The Customized Protective Estate Planning Solution™.