New 2018 Tax Law Mostly Eliminates the Marriage Penalty

It’s been a constant thorn in the side of tax reformers – couples filing jointly would often end up in a higher tax bracket than they would have if they filed alone.

However, the new tax law’s tax thresholds for joint filings are exactly double that of filing individually (except in the two highest brackets)– meaning there’s no penalty for most taxpayers.

Isn’t love grand?

Find out how the 2018 tax law will change your financial life.

Contact Tax Ninja for a consultation

Under the 2018 Tax Law, Inflation Will no Longer Rise at the Rate of Inflation

The 2018 tax law changes the way the IRS calculates inflation.

We promise we’ll keep this from getting complicated.

The way most economists calculate inflation is through the Consumer Prince Index for urban consumers (the CPI-U), which tracks the prices of goods and services that most people use.

The 2018 tax law has the IRS using the “Chained Consumer Price Index.”  Basically that’s the same thing, except that it assumes that if something gets too expensive, consumers will switch to a cheaper alternative.

So inflation under the new way the IRS tracks it (the “Chained CPI”) will increase more slowly than the way they were tracking it before.

Which is more accurate?  Honestly we don’t want to argue about it.  What we want to do is figure out what this will do to your taxes, and how you can use it to save the most money.

Let’s do that.  Contact Tax Ninja for a consultation.

2018 Tax Law Keeps Electric Car Credit – Sort Of

Political observers were surprised when the 2018 Republican tax law kept incentives for renewable energy sources, including a $7,500 tax credit for people who purchase electric cars.

But if you want the best selling models of those cars and are counting on the tax credit, better buy them soon.

That’s because the tax incentive vanishes after a manufacturer has sold over 200,000 electric cars, and Tesla and General Motors are both expected to hit that threshold this year, meaning that the government incentive to purchase their vehicles – the most popular in the class – would vanish.

The 2018 tax law has a lot of idiosyncrasies, and they can mean thousands of dollars to you.  Find out everything you need to know to save money.  Contact Tax Ninja for a consultation.

How Does the 2018 Tax Law Change Charitable Deductions?

The 2018 tax law has good news and bad news for charities and people who like to donate to them.

The good news is that the new tax law raises the limit on the amount of charitable donations that can be deducted in a year by 10%.  It used to be 50% of your adjusted gross income, and now it’s 60%.

The bad news is that charitable deductions only kick in as a tax break if your itemized deductions exceed the standard deduction – which is now significantly larger.  So while people who give lots of money to charities, big donors, will have a new incentive to keep giving, people who give small or medium sized donations might no longer get a tax break on those contributions at all.  They’d end up paying the same amount in their taxes with or without giving charitable contribution.

So if people are giving for the tax break, there could be a spike in big gifts, but we could expect a significant drop in small ones.

Find out how the new tax law affects you.  Contact a Tax Ninja for a consultation.

2018 Tax Law: What Deductions are Disappearing?

The new tax law does not cut graduate school tuition deductions or the deduction for teachers buying school supplies, as many had feared.  But a number of individual itemized deductions are going away in 2018.  Here’s a partial list:

  • Personal exemptions – you used to get $4,500 off of your taxes for you and every dependent. Now that’s gone.
  • Moving expense deductions (except for active military personnel)
  • Home equity loan interest
  • Professional license and regulatory fees
  • Parking and transit reimbursement from your employer
  • Required medical tests for a job
  • Continuing professional education
  • Tax preparation fees
  • Investment fees
  • Alimony deductions (though that doesn’t phase in until 2019)

And of course State and Local Taxes (SALT) deductions are now capped at $10,000.

Some of these changes could have significant social impact over time.  To see how they impact you, and how you can save as much money on your taxes as possible, contact Tax Ninja for a consultation. 

Did the 2018 Tax Law Really Repeal the Individual Mandate?

Yes and no.  Technically the new Republican tax law does not repeal the individual mandate, that’s still the law of the land.  But it does eliminate the penalty for not following the law, so in practice people can ignore it with no consequences.  If found guilty of violating it, they’d pay a whopping $0.

Is that in fact “repeal?”  That’s up to you to decide.  What we do is figure out the practical impact of the tax law on your financial life, so we can save you money.

2018 Tax Law Likely to Increase the Cost of Medical Devices

The most famous and far-reaching impact of the 2018 tax law on healthcare is likely the elimination of the “individual mandate” provisions of the Affordable Health Care Act.

But one small and less talked about provision of the 2018 Tax Law is a 2.3 percent tax on total sales of medical devices at the manufacturer and wholesaler level.   Taxes like these, on items ranging from pacemakers to stents to defibrillators, are almost always passed on to consumers, and can also have far-reaching impacts on the costs of the entire health care system.

This is what’s often known as an “invisible” tax – one that you’re not paying directly, but that you’re paying for somebody else – and it’s very difficult to adjust your own tax strategy to accommodate these increases.  The best tactic is to make sure you’re taking full advantage of those areas where smart preparation can save you money.

Save money on your taxes.  Contact Tax Ninja for a consultation

2018 Tax Law – What Happened to the Personal Deduction?

In 2018, the Personal Deduction is gone.  Poof.  Vanished.

Why do you care?  Well, because it let you deduct $4,500 of your taxes for yourself and every dependent.  So if you have a lot of dependents, you’re going to take a hit under the new tax law.

Will that be balanced out by the overall lower rate?  That depends on your specifics.  We can help you figure that out.  Contact Tax Ninja for a consultation

The Republican 2018 Tax Plan – Who Wins, Who Loses?

If your taxes are simple, and you don’t have a lot of dependents, the new tax law could be good for you.  You might not even need a tax professional.

If you’re pulling in the money, you’ve got ways of saving even more money on your taxes – especially if you can avoid the AMT and if you itemize.

But if you’ve got multiple dependents, there’s every chance you’re going to take a hit.   Maybe a substantial one.

Either way, the smart play is to get a Tax Ninja on your side.  Contact us for a consultation, to figure out how to make the system work for you.

 

2018 New Tax Law – Earned Income Tax Credit

The 2018 Tax Law has slightly increased the Earned Income Tax Credit.  What does that mean for you?  It depends on your income, and how many children you have.

Here’s the quick walk through, in chart form:

Filing Status:   No Children 1 Child 2 Children 3 or More
Income $6,800.00 $10,200.00 $14,320.00 $14,320.00
Single or Head of Household Maximum Credit $520.00 $3,468.00 $5,728.00 $6,444.00
Phaseout Begins $8,510.00 $18,700.00 $18,700.00 $18,700.00
Phaseout Ends $15,310.00 $40,402.00 $45,898.00 $49,298.00
 
Married and Filing Together Income $6,800.00 $10,200.00 $14,320.00 $14,320.00
Maximum Credit $520.00 $3,468.00 $5,728.00 $6,444.00
Phaseout Begins $14,200.00 $24,400.00 $24,400.00 $24,400.00
Phaseout Ends $21,000.00 $46,102.00 $51,598.00 $54,998.00

Need a longer walk through?  We can help with that.  Contact a Tax Ninja for a consultation