On Dec. 22, 2017, President Donald Trump signed the Republican tax plan into law. But now your work is just beginning. That is, you’ll be doing your taxes soon, or hiring someone else to do them.
And if you’ve hired a tax preparer for years to do your taxes, you may well wonder if this is the year you can let that person go and do them on your own. After all, for a couple years now, House Speaker Paul Ryan has frequently used a postcard as a prop and indicated that American taxpayers would be able to fill out their taxes on a form about the size of a postcard once the tax bill was passed. And in December of last year, President Trump said that Americans would be able to “file their taxes on a single, little beautiful sheet of paper.”
Tax experts generally agree that won’t be the case. Still, for some Americans, filing should be easier. For many, it’ll be about the same. For some of you, it’ll be harder. Here’s how it breaks down.
[See: Answers to 7 Burning Tax Questions.]
Filing taxes will be easier for – the average American taxpayer. Of course, the question you’re probably asking yourself is: How do I know if I’m an average taxpayer?
The safe answer is that if you’re paid by an employer and have always found filing your taxes a fairly painless process, then you’re an average taxpayer. And if that’s the case, you may find it even easier to file, according to Bradley Heim, a tax law expert and associate professor at Indiana University’s School of Public and Environmental Affairs in Bloomington, Indiana.
“For the average taxpayer, filing will generally be simpler,” he says. “Many taxpayers who had been itemizing deductions will now be taking the standard deduction since it doubled, and so they won’t need to value contributions to charity, won’t need to dig up property tax bills and won’t need to figure how much in mortgage interest they paid. In addition, the miscellaneous deductions have been repealed, so even those who itemize will find the form to be shorter and simpler.”
Filing taxes will be about the same for – people who file with tax preparation software. Jason Howell, a certified financial planner who owns a wealth management firm in Vienna, Virginia, says that going forward, taxes shouldn’t be harder or easier especially for those using tax preparation software.
“It’s just that the numbers on exemptions and deductions and limits changed. It really won’t be any harder because the kind of changes that were made can be easily made by software providers,” he says.
So if you like your tax preparation software method, Howell feels you probably should just continue going with that.
[See: 10 Tax Breaks for Retirement Savers.]
Filing taxes will be more difficult for – taxpayers who itemize and claim state and local taxes, and taxpayers with complex taxes. Kurosh Moassessi owns Moassessi & Associates, a corporate tax and consulting firm in Reno, Nevada. He has been doing this for 30 years and sees a lot of potential problems for some taxpayers.
“These individuals, mainly living in states with high state income taxes, will see their state and local taxes, which would include property taxes, capped at $10,000,” Moassessi says. “So imagine you live in the San Francisco Bay Area where the average price of a home is almost $1 million and the property taxes will be close to $20,000. The deduction for property taxes in addition to the state income taxes that the taxpayer pays will now be limited to $10,000, taking a big chunk of deduction from the taxpayer’s income.”
There are other problems, Moassessi says, such as mortgage interest deductions being limited to $750,000 of mortgage debt.
“If your mortgage debt was incurred before Dec. 15, 2017, your limit remains at $1 million,” he adds.
And Moassessi thinks a lot of taxpayers will be tripped up on the elimination of the interest deduction on home equity loans. He says that this “is going to be an issue with those taxpayers who used to have this deduction on their tax returns and now starting in 2018 they do not have this deduction.”
[See: 13 States Without Pension or Social Security Taxes.]
Another, less-complicated way to put it, according to Frank Messina, senior accounting professor at the UAB Collat School of Business in Birmingham, Alabama: “The new tax plan will make filing on their own simpler for the average taxpayer, while wealthier taxpayers will find it more difficult.”
Some of the problem areas, Messina says, include qualified business income, business interest limitations and a lot of new law changes in taxes on foreign income.
“Those who simply have wages and use the standard deduction should have it very easy,” he says.
Heim also says that a lot of business owners will find that their taxes will be even more confusing.
“The most complicated piece of the reform is the deduction for pass-through income [business income taxed at the individual level rather than corporate level] and how it is limited for taxpayers with joint income above $315,000,” he says. “I would advise anyone in that income range with a pass-through business to work with a tax professional, since correctly applying those tests and figuring the proper deduction will not be easy.”
So, really, the new rule for American taxpayers is that if your tax situation is complex, you should probably have a tax preparer, and if your taxes are pretty simple to decipher, you can probably get by without one. Which is – exactly the same as the old rule.
Source by usnews…Share: -