The recently passed Tax Reform Bill brings many questions to the minds of caregivers and seniors: How does the tax reform bill impact me? What should I expect? What should I do next? Many financial advisors are asking the same questions. To get you prepared for 2018 – take a look at the key highlights below. Depending on your financial circumstances, the impact will vary so it is important to be mindful of these key takeaways and to discuss them with a financial advisor.
The New Tax Reform Bill and Older Adults: Key Takeaways
Everyone is still trying to understand all of the specifics within the new tax reform bill. Most of the changes will go into effect for your 2018 taxes and not with your 2017 tax filing. Below are highlights identified by several sources including NCOA, AARP, and CNN.
New tax credit for non-child dependents, like elderly parents
Taxpayers may now claim a $500 temporary credit for non-child dependents. This can apply to a number of people adults support, such as children over age 17, elderly parents, or adult children with a disability.
Medical expense deduction changes
The medical expense deduction applies to those with high out-of-pocket health costs, and it reduces the threshold from 10% to 7.5% for two years in 2018 and 2019. Almost 5 million taxpayers aged 65+ use the deduction.
State and local tax deductions
The bill does not completely repeal all state and local tax deductions. It includes not only property taxes, but also state and local income and sales taxes, in reaching a $10,000 cap.
There are still seven tax brackets for individuals, but the rates have changed
Americans will continue to be placed in one of seven tax brackets based on their income. However, the rates for some of these brackets have been lowered. The new rates are: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
The standard deduction has essentially been doubled
For single filers, the standard deduction has increased from $6,350 to $12,000; for married couples filing jointly, it’s increased from $12,700 to $24,000.
The personal exemption is gone
You no longer can claim a $4,050 personal exemption for yourself, your spouse, and each of your dependents, which lowers your taxable income.
There is still much to understand about the tax reform’s impact on you so stay engaged. Some areas that are still unclear include the impact to Medicare and Medicaid. Stay tuned for new information throughout 2018.
For more Tax assistance, check out our blog Tax Tips for Caregivers.