Now that the new year is officially underway, you may be thinking through your finances for the next few years. Regardless of the specific area you’re focusing on, any type of financial planning needs to take the impact of taxes into account. In order to think about your finances as accurately as possible, you need to be aware of any changes to the tax code that may affect how much you pay.
To help ensure that any planning you’re doing is accurate and on the right track, we’ve put together an overview of the tax cuts and changes currently being discussed for the next few years:
Federal tax rates and brackets may be simplified from the current of system of seven down to just three. The brackets for individuals would be $0 to $37,500, $37,500 to $112,500 and above $112,500. The tax rates for those brackets would be 12, 25 and 33 percent. The same three brackets for married couples would be $0 to $75,000, $75,000 to $225,000 and above $225,000.
Another change being discussed is more than doubling the standard deduction. The figures being used are $15,000 for single filers and $30,000 for married couples. If this change is put into practice, it would be done in conjunction with ending personal exemptions. It’s worth noting that calculations based on this and the first change we discussed above would have the impact of reducing most people’s tax burden.
Related to these changes are discussions about capping itemized deductions. The caps being talked about are $100,000 for individual filers and $200,000 for married couples filing jointly. The reason these caps have generated a lot of interest is they’re designed to help simplify tax rules and prevent those with higher incomes from taking deductions that fall into legally grey areas. But if these caps are put in place, it’s likely to happen in conjunction with the estate tax and alternative minimum tax being fully repealed.
The other change that may come to fruition over the next few years is eliminating the 3.8% tax on net investment income on people with incomes of over $200,000 for individual filers and $250,000 for joint filers.
While only time will tell exactly which cuts and changes go into effect, the good news is you don’t have to spend your free time monitoring the tax code to protect your financial standing. Instead, you can enlist expert tax service from Donohoo Accounting Services. We can take care of everything from income tax preparation to reducing IRS debt. So if you’d like help with anything related to your taxes, the best way to reach our very knowledgeable team is by calling 513-528-3982.
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