2018 tax laws comes with a slew of changes. To find out where you will stand come tax time, go to the IRS withholding calculator. If it shows you will owe tax, see my other post "Will I owe tax?" for steps you can take.
For individuals, 2018 comes with higher standard deductions and a reduction of deductible itemized deductions. The personal exemptions have been eliminated due to the higher standard deduction amounts.
Note that there is an additional standard deduction for elderly and blind taxpayers, which is $1,300 for tax year 2018. This amount increases to $1,600 if the taxpayer is also unmarried.
New Tax Rates
The Child Tax Credit increased from $1,000 in 2017 to $2,000 in 2018. The beginning phaseout also increased in 2018 to $200,000 ($400,000 married). This means after you reach $200k ($400k married), the credit starts getting lower. The age cut-off remains at 17. The child must be under 17 at the end of the year in order to claim the credit.
However, the new law added a $500 credit for dependents who do not qualify for the Child Tax Credit. This means an additional $500 even for older kids in college and older relatives that you are caring for at home. As long as they are still dependents, you are entitled to take the credit. The credit, in a way, replaces a portion of the personal exemption deductions which were eliminated in 2018.
Section 529 College Savings Plans can now be used to pay for K-12 tuition. The new tax law allows tax-free distributions from 529 savings plans to pay tuition for kindergarten through 12th grade at private schools. You can use up to $10,000 per student per year. Stay tuned as I will add more and more tax savings ideas and tips each day.