Dermer Law Firm Call 408-395-5111

The legal and tax experience you need

Based in Los Gatos, California, we assist individuals, families and businesses throughout the Bay Area.

How will the tax reform affect California citizens?

Many people are wondering what is included in the 500-page tax reform signed by President Trump in December, 2017. Most of the new tax changes won't go into effect until January, 2018. However, there are a few changes that will effect during the 2017 tax returns being filed now.

Some of these changes are regarding itemized deductions taken on a Schedule A.

  • Deductions for medical expenses can be taken in excess of 7.5 percent of adjusted gross income versus 10 percent of adjusted gross income last year. This is in effect for years 2017 through 2019 only.
  • For single and married couples filing jointly couples, there is now a $10,000 cap on deductions for combined state and local or sales taxes. For married couples filing separately, it is $5,000.
  • Many miscellaneous deductions have been eliminated, including investment fees, tax preparation fees, unreimbursed job expenses and moving expenses and the $20 per month bike commuting fee.

There are additional changes that will impact tax returns between 2018 and 2025.

  • Personal exemptions are eliminated, and standard deductions will go up. Whether one will offset the other remains to be seen. Currently, the personal exemption is $4,050 for each taxpayer and dependent claimed. The standard deduction of $6,350 will go up to $12,000 for taxpayers filing singly and $24,000 for married couples filing jointly. This is expected to simplify the filing of taxes because fewer people will need to itemize deductions.
  • Child tax credits will go up from $1,000 to $2,000 per child and are refundable up to $1,400 even if the taxable amount is zeroed out.
  • Elderly dependents or children over 17 still in school will qualify for a $500 nonrefundable credit.
  • Undocumented immigrants using a taxpayer identification number to file taxes will not be able to claim the child tax credits unless each child has a Social Security number.
  • From 2018 until 2025, federal or private student loan debts that are discharged (due to disability or death) will not be taxed.

This is just a summary of some of the items included in the new tax bill. Because most people do not have time to read and study the new income tax laws on the books, it will be important for taxpayers to have a tax firm who is familiar with the legalities and consequences of the new tax laws.

Source: Investopedia, "How the GOP Tax Bill Affects You," Amy Fontinelle, Jan. 03, 2018

No Comments

Leave a comment
Comment Information