Back when the 2018 tax overhaul went into effect, many filers found themselves wondering how much those changes would affect them. And now that many folks are finally sitting down to do their 2018 taxes, the answer is becoming clearer. Here are a few ways your tax return might look different this year than in years past.
1. It might not pay to itemize
Even if you've itemized on your tax return in the past, this year, doing so might not make sense. The reason? Before 2018, the standard deduction for single tax filers was $6,350, and for married couples filing jointly, it was $12,700. But for the 2018 tax year (meaning, the tax year you're filing for on this year's returns), the standard deduction increased to $12,000 for single filers and $24,000 for joint filers. As such, you're likely to find that you'll get a higher tax break by going with the standard deduction than by adding up all of your individual deductions, unless they happen to be pretty high.
Keep in mind that if you live in a high property-tax state and are used to writing that expense off, the maximum you can deduct this year for state and local taxes (which include property taxes) is $10,000. Previously, there was no cap on that deduction, so many filers capitalized on it. But if you're a joint filer, you'll need over $14,000 in deductions on top of your state and local tax deduction to make itemizing worth it.
2. Your refund might be smaller
One major goal of the 2018 tax overhaul was to put more money back in working Americans' pockets. As such, virtually all individual tax brackets were lowered so that workers would pay less tax on their highest dollars of earnings. To accompany that change, the IRS released new withholding tables that dictated how much tax employers were to hold back from employee paychecks, and many workers did indeed see their take-home pay increase last year.
The result, however, is that tax refunds are already coming in smaller this year, since much of the money filers would typically get back from the IRS during tax season was already paid to them in 2018. Therefore, don't be shocked if your refund isn't as substantial this time around. Furthermore, if you saw a large increase in your take-home pay but didn't get a raise, there's a chance you might've underpaid your taxes, in which case you might actually owe the IRS a bit of money this year.
3. You might get more relief if you have kids
If you have children under the age of 17 in your household, you might qualify for the Child Tax Credit -- even if your income level prevented you from claiming that credit in years past. Before 2018, the Child Tax Credit began to phase out for single tax filers earning $75,000 and couples filing jointly earning $110,000. But for the 2018 tax year, these thresholds have increased to $200,000 and $400,000, respectively, which means more families are likely to qualify.
And that's not all. Whereas the Child Tax Credit was previously worth up to $1,000 per qualifying child, for the 2018 tax year, it's worth up to $2,000 per child. Furthermore, up to $1,400 per child is now refundable, which means that if the Child Tax Credit reduces your tax liability to below $0, the IRS will send you a check for that difference.
Will last year's massive overhaul improve your tax situation, or make it worse? You won't really know until you file your return, so if you've yet to start working on your taxes, now's the time to get moving.