The IRS personal exemption for each taxpayer and dependent has been eliminated while the standard deductions have been doubled. RyanJLane/Getty Images The 2017 Tax Cuts and Jobs Act promised to reduce the tax bill for most Americans by lowering income tax rates, introducing new deductions for business income, and significantly increasing the standard deduction and child tax credits. But some popular deductions were also eliminated starting in 2018, the most prominent being the personal exemption. In the past, every taxpayer was allowed to automatically deduct $4,050 from his or her taxable income as a personal exemption. The same personal exemption could be claimed for a spouse and for each dependent child under 19 years old, plus full-time students between 19 and 23 years old. To give an example, a married couple with three qualifying dependent children (12, 17 and a 21-year-old college student) could use the personal exemption to automatically deduct $20,250 ($4,050 x 5) from … [Read more...] about What Happened to the Income Tax Personal Exemption?
Paying taxes is never fun, but how do you make sure you don't overpay? Nora Carol Photography/Getty Images Just a few days before Christmas 2017, the U.S. Congress, cheered on by President Donald Trump, passed the biggest tax overhaul in decades, packaging it as a gift to all Americans. Highlights of the tax bill — which took effect on Jan. 1, 2018 — include lower federal income tax rates for almost all households, a near doubling the standard deduction to $12,000 for singles and $24,000 for married couples filing jointly, and a doubling of the child tax credit to $2,000 per kid. To comply with budget rules, all of those tax reductions for individual taxpayers will "sunset" or revert to 2017 levels in 2025. That's not the case for big cuts to corporate income taxes and estate taxes, which are permanent. That said, very few things in today's volatile political climate are permanent. It's possible that American voters will elect a very different Congress and president in … [Read more...] about What You Can Do Now to Get the Most from the New Tax Law
Talk to a tax professional to find out how you can maximize your deductions. Jupiterimages, Creatas Images/Thinkstock "You can deduct that." "You can write that off." "Deductible expenses." You've probably heard these phrases a hundred times. But what do they mean? What are tax deductions and how do they work? And why are tax deductions so important? The purpose of tax deductions is to decrease your taxable income, thus decreasing the amount of tax you owe to the federal government. There are hundreds of ways to use deductions to reduce your taxable income, but many people don't know about them or know how to take advantage of them. The IRS is currently holding more than $1 billion of unclaimed tax refunds. [source: Bell]. To find out how you can maximize your deductions, it's best to talk to a tax professional, such as a tax preparer or lawyer. It's their job to know about tax deductions, and they can guide you to use deductions efficiently and legally. The earlier in the year you … [Read more...] about How Tax Deductions Work
Viewers look at a Diego Rivera painting on display in New York in 2017. Rivera is one of many notable Mexican artists who've paid their tax obligations with artwork. Kena Betancur/AFP/Getty Images Nobody likes paying taxes. OK, maybe billionaire investor Warren Buffet doesn't mind kicking up a share of his earnings to the government bean counters. For the rest of us, the idea of turning over a portion of our paychecks to big bureaucracy is the equivalent of being asked to donate a couple of fingers to medical research. That's not to mention that complying with the maze of tax laws in place around the world isn't always easy. That's especially the case for folks in creative fields where income can be erratic. (Just ask Stephen Baldwin. Or Wesley Snipes. Or Nicolas Cage.) The good news for artists in Mexico, though, is that they can use the fruits of their creative endeavors to keep the tax man at bay. Pago en Especie (Payment in Kind) is a six-decade old program in which Mexican … [Read more...] about In Mexico, Artists Can Pay Their Federal Taxes With Artwork
A provision in the GOP proposed tax bill could have massive changes for churches and charities. Minette Hand/EyeEm/Getty Images Deep in the 420-plus pages of the tax reform bill that Republicans are trying to squeeze through Congress are a few lines that would allow some tax-exempt organizations like churches and charities to endorse or oppose political candidates without fear of government blowback. Repealing what is known in the tax code as the Johnson Amendment is, to many, a dangerous and radical stomping on the long-held line that separates church from state. The repeal could lead, many warn, to politicking from the pulpit and an unprecedented flow of tax-free political money into houses of worship and charities. Maybe even worse, the big-bucks windfall, some fear, could force these organizations — known by their tax code standing, 501(c)(3)s — into taking sides in an increasingly partisan nation. It's a dire prediction because, if you can't get away from politics … [Read more...] about How Repealing the Johnson Amendment Would Change Churches and Charities