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Tax Changes for 2018
Most of the provisions of the Tax Cut and Jobs Act took effect in 2018, here's what you can expect.
Tax rates were reduced!
Most taxpayers will see a reduction in your overall income tax. Your refund however may not be as large even though your taxes may have gone down. Why? Because the IRS also revised the withholding tables and starting in February, 2018 your withholding from your paycheck went down, so you had more money in your take home pay. The IRS was concerned they were too generous with the reduced withholding and that refunds may be smaller or you might have a balance due on your return this year.
Huge For California Taxpayers!
California Does NOT Comply With Most of The New Tax Law Changes!
This means that your federal return will be significantly affected by the new tax laws, but your California return will still be using the old tax law, and things that are no longer deductible on your federal return will still be deductible on your California return!
Here are some of the other changes that started in 2018.
1040 EZ and 1040 A have been eliminated!
The IRS revised the Form 1040 so it fits on half of a page, however they added multiple schedules to accommodate the other reporting items from the old Form 1040. Government Intelligence?
The Dependent Exemption has been eliminated!
This has been offset by a higher $2,000 per child child tax credit as well as a new $500 dependent credit for qualifying dependents.
The Standard Deduction has Increased!
The new standard deductions will be:
This means fewer people will be itemizing their deductions for 2018.
State and Local Tax deductions are limited!
The state income tax you had withheld from your paychecks as well as any property taxes, and other state and local income taxes you paid will now be limited to $10,000. This will reduce tax deductions for those with higher incomes and higher property taxes.
Miscellaneous Deductions (subject to 2% of Income) have been eliminated!
This will impact those with large employee business expenses like outside salespeople and those with high union dues and those who commute to temporary work locations.
The Individual Mandate is with us for one more year!
The Obamacare Penalty for not having been covered by medical insurance has been repealed, but the effective date isn't until 2019, so we have one more year to deal with this extra tax.
Other notable items...
There are other provisions that have changed in the new tax law, but the ones above are the ones that will affect most taxpayers.
There were some significant changes for business owners as well!
20% Deduction for certain Qualifying Business Income!
The provision that will have most business owners excited is the new 20% Deduction for certain Qualifying Business Income. This will help ease the tax burden of many who own profitable businesses. This will not reduce the Self Employment Tax, but may take some of the sting away as it can reduce regular income tax on those business profits. There are limitations to this deduction for certain types of businesses.
Other business tax changes include;
There are some technical glitches in the way the new tax law was written, but we're ready to help you get the best result from the new tax laws! It will be an interesting tax season this year, and we look forward to working with you to get the best result for your tax situations!
Express Income Tax Services | 6010 Commerce Blvd. Suite 142, Rohnert Park, CA 94928 | Phone: (707)584-8989 | Fax: (707)595-4725 | firstname.lastname@example.org