How Does the Recent Tax Reform Affect You?Posted on February 12th, 2019
Every year, our country’s tax laws are updated to maintain the pace and balance of our economy. Most often, these changes are minor, with most taxpayers barely noticing any difference at all.
2018, however, saw the enactment of one of the most sweeping tax reforms in the last 30 years in the form of the Tax Cuts and Jobs Act. This reform brings a host of significant changes to the way we are taxed and what opportunities are available to both individuals and businesses.
You may find yourself asking “But how does this affect me?” Depending on your income and status, the answer could vary wildly. Let’s take a look at just a few of the ways that these changes impact you.
New Regulations and a Massive Tax Cut for Businesses
One of the most notable changes that came with the Tax Cuts and Jobs Act was the corporate tax rate adjustment, slashed from 35 percent all the way down to 21! This reduction is meant to stage America as a hub for big businesses to bolster the economy.
Some new regulations come with it, though. For instance, it has long been accepted that people in business will often meet with potential clients for dinner or lunch to discuss business-related topics, which has always been considered an entertainment expense that companies could write off on their taxes.
Deductions of this nature are no longer the case, though. Meals, drinks, and other forms of “entertainment” are no longer considered deductible.
New Rates and Deductions for Individuals
Just as the business world has changes to adapt to, so too do the individual taxpayers of America. It’s not all corporate tax cuts and expense reports; the average Joe has new tax brackets to consider, as well as a higher standard deduction and new deductible expenses.
The new standard deduction for singles and married couples separately filing is up to $12,000, and up to $24,000 for those filing jointly, nearly double the amount in previous years. This increase should make itemized deductions all but obsolete for the average taxpayer.
There were also adjustments to tax brackets and a reduction of rates of taxation for those within them. However, these changes are relatively minor and won’t have as much impact as some of the more sweeping differences.
Tax Services, LLC, is a CPA firm with locations in New Iberia and St. Martinville. Contact us today to schedule a free consultation and find out more about how the TCJA affects your tax situation.