News from Tax Express
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File Your Taxes Early!
January 2023
IRS will begin accepting e-filed returns mid-January 2023. Tax Express of Ga.will be receiving returns early. Call us with any questions. We'd love to get your tax documents early.
Highlights from the Tax Cuts and Jobs Act (TCJA):
The standard deduction will increase. In 2022, the standard deduction amounts will be:
- $12,950 (single or married filing separately)
- $19,400 (head of household)
- $25,900 (married filing jointly)
Personal and dependent exemptions are eliminated from 2018-2025 but the TCJA increases the maximum child tax credit from $1000 to $2000 per qualifying child.
The TCJA also allows a new $500 nonrefundable credit for dependents who do not qualify for the child tax credit. Taxpayers can claim this credit for children who are too old for the child tax credit, as well as for non-child dependents.
TCJA has a large impact on itemized deductions, as several itemized deductions have been eliminated or modified.
Fully eliminated
Miscellaneous itemized deductions subject to the 2-percent floor
- Employee business expenses, including mileage
- Tax preparation fees
- Investment interest expenses
Personal casualty and theft losses (except for certain losses in certain federally declared disaster areas)
Limited
State and local income taxes (SALT) or state and local sales tax, plus real property taxes, may be deducted, but only up to a combined total limit of $10,000 ($5,000 if Married Filing Separate)
Home mortgage interest has several modifications:
- Interest on a home equity loan is no longer deductible
- Interest on a new home mortgage is limited to interest paid on a maximum of $750,000 ($375,000 if MFS) of a new mortgage taken out after December 14, 2017.
- Taxpayers with a mortgage taken out before December 15, 2017 can continue to claim home mortgage interest on up to $1 million ($500,000 if MFS) going forward; the $1 million ($500,000 if MFS) limit continues to apply to a refinanced mortgage incurred before December 15, 2017.
Modified
Charitable contributions: The deduction for charitable contributions is expanded so that taxpayers may contribute up to 60% of their adjusted gross income, rather than up to 50%.
Gambling losses remain deductible, but only to the extent of gambling winnings. The definition of losses from wagering transactions is modified.
Medical expenses remain deductible. For 2017 and 2018, medical expenses are deductible to the extent they exceed 7.5% of AGI. In 2019, the threshold will increase to 10% of AGI.
Some education benefits remain the same, others modified
Taxpayers can continue to claim the American Opportunity Credit, a credit of up to $2,500 per year for the first four years of college education, and the lifetime learning credit, a credit of up to $2,000 per year for qualifying education expenses.
529 plans can now be used for K-12 expenses.
- Plans can distribute up to $10,000 each year for tuition incurred for enrollment or attendance at a public, private, or religious elementary or secondary school.
- The $10,000 limit for elementary and secondary school is applied on a per-student limit.
Health care penalty eliminated, beginning in 2019
Everyone was excited to hear that the penalty for failure to obtain health insurance coverage (the “individual mandate”) will be eliminated but it does not begin until 2019.
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