How will my 1040 form change under the Tax Cuts and Jobs Act?
The Tax Cuts and Jobs Act will bring about significant changes to our taxes in the coming year. Filing for taxes will involve several new considerations and even your tax return form itself will be different. To ensure you comply with the new tax code so as to avoid any potential problems with the IRS, you should review the most important changes coming to the tax filing process before tax season hits.
Your Tax Form Will Change
You will no longer file using a Form 1040A or 1040-EZ. Instead, you will use the newly designed Form 1040. This form consists of two pages and will summarize your income, deductions, and credits. For many filers who hire a professional to do their taxes or who do their taxes online will not likely notice a difference with the form.
Your Tax Rate May Drop
Per the Tax Cuts and Jobs Act, the IRS will still use seven tax brackets, but many brackets will owe a reduced tax rate. The top tax rate has reduced from 39.6% to 37%, for example. However, not every filer will save. With altered tax ceilings, some filers may actually be bumped to a higher tax bracket.
The Standard Deduction Has Increased
On your return, you will still have the ability to ether take an itemized deduction or standard deduction, however the standard deduction amount has greatly increased. Now, the standard deduction will be nearly double as compared to 2017’s deductions. Joint filers can claim a $24,000 standard deduction, while singles can claim $12,000. With the increased standard deduction, it is likely that more filers will take the standard deduction rather than itemizing their deductions.
Your Exemptions Have Changed
Whereas before you could claim exemptions for yourself and your spouse, these exemptions have now been eliminated. The rationale is that the increased child tax credit, which jumped to double from 2017, will more than make up for the old personal and dependency exemptions. These are just a few of the many changes you will see on your 2018 tax return. Contact a tax attorney for more assistance with any tax issues you may face.