Can you believe 2018 has come to a close? It seems like only yesterday, we were counting down to the New Year. I hope that you were able to reach your personal and professional goals and have a little fun along the way. Now for a little serious talk. As you prepare for 2019, you should be aware of federal tax changes that will affect your 2018 taxes. These provisions rolled out on January 1, 2018, which means that they will influence your 2018 tax return.
Here are a few provisions that will take effect for the 2018 tax year.
State and Local Taxes
Here is an interesting perk. For the 2018 tax year (meaning the taxes you file in 2019), you may be able to deduct sales tax, state and local income tax, and/or property taxes capped at $10,000 ($5,000 for married filing separate) if you itemize deductions.
Medical Expenses: You will notice a significant change in the way you can itemize medical expenses. The maximum for all taxpayers to claim an itemized deduction for medical costs is reduced from 10 percent to 7.5 percent of your adjusted gross income. The change applies to taxable years from December 31, 2016 to Jan. 1, 2019. For example - if you make $100,000 you may now deduct any medical expenses over $7,500 if you itemize your deductions.
Personal Casualty Theft/ Losses Old Rule: Under current tax law individuals can deduct uninsured losses above $100 when the property is lost due to a fire, shipwreck, flood, storm, earthquake or some other type of other natural disasters. The deduction was allowed as long as the total loss amounts were greater than 10 percent of the taxpayer's adjusted gross income.
New Rule: The new tax bill only allows taxpayers to claim the deduction if the loss occurred during a federally declared disaster, through 2025.
Business Income Business owners, even people who just have side gigs/ paid hobbies, may benefit from tax code changes. If you are a business owner and have either a sole proprietorship, a limited-liability corporation, partnership or an S-corporation you will have more opportunities to deduct expenses.
Business Property Assets If you are a business owner who plans to purchase new assets, such as office equipment, you can deduct 100 percent depreciation.
Essential Accounting is Always Here to Help. We are a highly regarded professional accounting firm. Our services are up-to-date with the latest tax laws, and we are happy to assist you this tax season. We offer a full range of services to individual and business clients. Because our accounting practice is local and virtual, clients benefit by receiving personalized, quality service. We look forward to serving you in 2019!