Even if you haven’t seen any changes to your paycheck, the new tax laws could affect you. Heather Fuller from H&R Block helped us separate myth from fact when it comes to the new tax laws.
MYTH: The new tax reforms do not affect me.
Paychecks should be going up for most employees to account for recent tax reform changes. But take-home pay is just one piece of the financial picture that taxpayers need to understand the impact of tax reform and plan for its many changes. The other major piece of the picture is their tax refund or balance due. There are many variables in the tax reform law that make it difficult for taxpayers to know how everything will come out in the end. H&R Block offers a tax impact analysis that can also clarify your specific situation. For example, many taxpayers are concerned about the $10,000 limit on itemizing state and local taxes. The review might show you that even though you may not be able to deduct all your 2018 state and local taxes, you might get a better tax outcome in 2018 than in 2017, due to an increased standard deduction, more favorable tax rates or a larger child tax credit.
MYTH: There is nothing I can do now to affect my 2018 taxes
Although 2018 tax withholding tables have been updated for the new tax rates under the new law, taxpayers might still want to update their W-4. For example, a family of four with a salary of $90,000 would see their refund more than double and may want that money in their paychecks instead of waiting until tax season. Taxpayers can get a free personalized analysis of their tax reform impact during their H&R Block tax prep appointment. Based on the information from their impact analysis, a taxpayer might choose to adjust their employer withholdings by updating their W-4 or change the amount of quarterly estimated tax payments they make.
MYTH: Families won’t benefit from the new tax changes
There are many variables in this legislation that make it difficult for families to know if they will come out ahead or not. Next year, when taxpayers file taxes, most families will be impacted by the loss of the personal exemption of more than $4,000 per person. However, families will receive an increased child tax credit of $2,000 for each qualifying child under age 17 as long as they are under the income limitations. In addition, a new family tax credit of $500 will be available for “non-child dependents” which includes children 17 and older. The increased child tax credit, new family tax credit and the larger standard deduction may or may not make up for the loss of the personal exemption.
From March 1-25, 2018, any new H&R Block clients can pay half the price they paid last year to another tax preparer (subject to $125 minimum charge). To qualify, taxpayers can bring their tax preparation receipts from last year to their local H&R Block office to receive the half-off discount. The offer applies to individual and business, federal and state tax returns for tax year 2017. For more information and to find a tax pro near you, click here.