Tax Law Changes – How Will They Affect You? – Alabama Life
Tax Law Changes – How Will They Affect You?
Unless you have been operating under a media blackout you have at least heard about the new federal tax bill (over 1,000 pages long) that was passed into law in December. For most people the law appears to be a positive change which allows them to keep more of their income. One thing to note though is that some of the changes will expire in 2025 unless something is done to either extend, or make the new changes permanent.
How will the new changes affect you? The short answer is it depends. Please note I am not qualified to provide tax, or legal advice so please consult with your chosen professional for their advice. Some key things about the new tax law are the following:
The tax brackets have been reduced (see below for new brackets) thus generally lessening tax obligations for many.
The Mortgage Interest Deduction remains the same for current homeowners and is capped at the first $750,000 of the mortgage loan for new purchases.
The Standard Deduction that some people use instead of itemizing deductions is doubled. For single filers it goes from $6,350 to $12,000 and married / joint filers from $12,700 to $24,000.
The Personal Exemption (e.g. $ deduction for each person on the tax return) is eliminated.
Many Itemized deductions are not eligible to be claimed.
Charitable contributions are still deductible.
Healthcare expenses that reach 7.5% of income can be deducted rather than the 10% requirement now. Additionally, the penalty for not having health insurance is $0 in the new law.
The Child Tax Credit is increased from $1,000 to $2,000.
State and local taxes up to $10,000 can be claimed.
Business income (up to a certain limit) that is filed on a personal tax return will be adjusted to reduce the tax rate. The new standard deduction is $20,000 for this type of income.
So as you can tell just by the ten points above the new tax law is significant. If you receive a paycheck you will probably see a positive change in take home pay very soon. One thing you should probably plan now is to get with your tax and financial advisors early to discuss if you should adjust your finances to best take advantage of the new law.
$19,050 or less – 10% tax rate
Over $19,050 but not over $77,400 – $1,905 plus 12% of excess over $19,050
Over $77,400 but not over $165,000 – $8,907 plus 22% of excess over $77,400
Over $165,000 but not over $315,000 – $28,719 plus 24% of excess over $165,000
Over $600,000 – $161,379 plus 37% of the excess over $600,000
Over $82,500 but not over $157,500 – $12,698 plus 24% of excess over $82,500
Unmarried Individuals Other Than Surviving Spouses and Heads of
$9,525 or less – 10% tax rate
Over $9,525 but not over $38,700 – $952.50 plus 12% of excess over $9,525
Over $38,700 but not over $82,500 – $4,453.50 plus 22% of excess over $38,700
Over $82,500 but not over $157,500 – $14,089.50 plus 24% of excess over $82,500
Over $157,500 but not over $200,000 – $32,089.50 plus 32% of excess over $157,500
Over $500,000 – $150,689.50 plus 37% of the excess over $500,000
Over $300,000 – $80,689.50 plus 37% of the excess over $300,000
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