It is the beginning of September and most people are not thinking about taxes right now. Unfortunately, because of the many new laws and changes that happened at the end of last year, there is no better time to be thinking about them than right now.As always, there is a lot of partial information or misinformation floating around about the new tax laws. This article and others in the future will hopefully shed some light on the new laws and point you in the right direction to get the answers.The standard deduction is increasing for everyone. The standard deduction is a set amount of money that the IRS allows people to deduct from their income, based on their filing status. The new laws increased the standard deduction for a single filer to $12,000, head of household to $18,000 and married filing jointly to $24,000. The alternative to the standard deduction is itemized deductions like medical expenses, mortgage interest, real estate taxes and charitable donations. Many people seem to think they will not be able to deduct their mortgage interest or taxes under the new laws. That is not the case, but with the higher standard deduction, it is possible that fewer people will need to itemize their deductions.There are several deductions that have been allowed in previous years that are no longer allowed, such as employee business expenses. This means that if you work for someone as a W-2 employee and are used to deducting the money you spend for tools or other work related items, this is no longer going to be an option. As always, whichever way provides the most benefit is how most people should file. Something to keep in mind though, even if you donít itemize your deductions, your charitable giving could benefit you if you are filing a Colorado tax return.In exchange for a higher standard deduction, the personal exemption has been reduced to $0. In the past, for each person that you claimed on your tax return you could subtract around $4,000 from your income. For those families with several dependents, this provided a huge financial benefit to them. With this deduction going away, it is imperative that people check their withholdings to make sure they are not surprised at the end of the year.Another upside to the new tax laws is the increase in Child Tax Credit (CTC) and the implementation of a new Dependent Credit. The CTC is a reduction of how much you owe to the IRS for each child under 17 years of age, up to $1,000 per child. In the past, if a taxpayer earned too much money, the credit was taken away. It was not uncommon for a dual income family to lose the entire CTC because of their income. In addition to increasing the credit amount from $1,000 to $2,000 per eligible child, the IRS has also increased the income level that is required before the credit starts to go away. Now, more taxpayers and families will benefit from the new CTC. Along with the CTC, the IRS is offering a Dependent Credit of $500 per eligible dependent. This credit is also a dollar for dollar reduction in what you owe to the IRS for taxes. Eligible dependents will be adult children or other relatives that are listed on your tax return.Finally, the tax rates have gone down for most people, resulting in fewer taxes being owed for 2018 than previous years. One downside to the decrease in tax rates is that employers are also withholding fewer taxes from each paycheck. It is very important, with only a few months left in the year, that each person checks their withholdings to make sure there is not a surprise at the end of the year. Unless you are well-versed in the tax rules and calculations, it is a good idea to ask a tax professional for help understanding all of these new laws and how they are going to impact your specific situation. If you donít have a tax professional, make sure you choose wisely as not all tax preparers are tax professionals. Get recommendations from friends or family and look for someone who has the experience and knowledge you need.
