Many Americans are anxious to find out what the Tax Cuts and Jobs Act of 2017 (TCJA) means for their 2018 filings, and early returns being filed now are giving us some clues. It appears that quite a few taxpayers will either be getting smaller refunds than last year, or may even be owing the government more money than they had in the past.
There were some very visible changes to tax law with the TCJA of 2017. One was the standard deduction increase which is now $12,000 for single filers, and $24,000 for married filing jointly – up from $6,350 and $12,700, respectively. While this may seem like a boon for most taxpayers who can now take almost double the standard deduction available in the previous year, the benefit has been dampened by another more visible tax law change – the State and Local Tax deduction limit, commonly referred to as the “SALT” deduction. The $10,000 cap on SALT deductions may not seem like a big deal at first, but the Personal Property Tax deduction – property taxes paid on homes, cars, boats, etc. – is no longer unlimited. This hits high-tax states such as New York, California, and Connecticut, among others, particularly hard. Taxpayers in these states may have been accustomed to deducting as much as two to three times the current cap for their property taxes alone. The SALT cap potentially puts many more families close to the standard deduction, where it may no longer make sense for them to itemize their taxes. Read more “Early tax returns are demonstrating the importance of tax-exempt income”