12 Tax Changes That Could Be Improving Your Finances

Americans across all income levels can pretty much agree on one thing: Taxes are a drag, and paying less of them is preferable to paying more. And here's some good news in that regard -- because tax laws are constantly evolving, your personal financial situation has the potential to improve from year to year. Here are a few specific changes that may be benefiting you.

The majority of taxpayers who file a return opt for the standard deduction rather than itemize, largely because they don't have enough write-offs for the latter option to make sense. The 2018 tax overhaul virtually doubled the standard deduction, giving filers a chance to exempt even more of their wages from taxes. And recently, the IRS announced that in 2020, the standard deduction will be rising again, this time to $12,400 for single tax filers or those who are married filing separately, $18,650 for heads of household, and $24,800 for married couples filing jointly.

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Another major change brought about by the 2018 overhead was a lowering of virtually all individual tax brackets. Your tax bracket is based on your earnings, and it dictates how much tax you'll pay on your highest dollars of income. A lower tax rate means you'll pay less tax on that money, thereby saving yourself more. Back in 2017, a single tax filer earning $100,000 would fall into the 28% tax bracket, paying 28% tax on his or her highest dollars of earnings. In 2020, a filer in the same situation will fall into the 24% tax bracket instead of 28%.

Under the old tax code, married couples filing jointly often got penalized from a tax perspective by combining finances, since in doing so, they'd be propelled into a higher tax bracket than they'd land in by filing individually. Because the new tax brackets for joint filers are now, for the most part, double those of individual filers, married couples filing jointly don't get hurt as badly.

The Child Tax Credit is a long-standing credit available to parents of children under the age of 17. Prior to the tax overhaul, the credit was worth up to $1,000 per child and phased out for individual tax filers earning $75,000, and joint filers earning $110,000. Following the tax overhaul, the credit has doubled to $2,000 per child, and the income limits for phaseouts are much higher: $200,000 for individual tax filers, and $400,000 for couples filing jointly.

If you itemize on your tax return and give money to charity, you're allowed to deduct the amount you donate to legitimate, registered organizations. Prior to the 2018 tax overhaul, you'd have the option to deduct donations of up to 50% of your adjusted gross income. As part of the tax overhaul, that cap was raised to 60%. Granted, most people can't afford to give away that large a percentage of their income, but if you're in a position to do so, you now get more leeway.

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Under the Affordable Care Act, anyone who didn't have health insurance would be slapped with a hefty penalty. Beginning in 2019, however, health insurance stopped being mandatory, and as such, those who go without it are no longer on the hook for penalties. This change is a mixed bag, though -- while it's a key source of savings for those who are forced to go without insurance for a period of time, it could, in some cases, make it too easy for Americans to skimp on health insurance and hurt their finances (and their health) in other ways.

The purpose of the alternative minimum tax, or AMT, is to ensure that higher earners pay their share of taxes rather than take undue advantage of the tax deductions available to them. The problem, however, was that over time, a growing number of taxpayers that certainly didn't fall into the "ultra-rich" category were getting slapped with AMT. One important thing the 2018 tax overhaul did was raise the income thresholds at which AMT exemptions phase out, thereby sparing more filers the headache and hassle of having to essentially calculate their tax obligation twice.

If you own a small business, like an S-corp or LLC, you may be eligible to deduct 20% of your pass-through income on you taxes. This benefit came into play following the 2018 tax overhaul, and it can be a huge source of savings if you qualify. If you're a higher earner, that's a very big "if," though, as certain professionals, like lawyers and physicians, are barred from claiming a pass-through deduction.

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Millions of Americans save for retirement in a 401(k). Currently, the annual contribution limits are set at $19,000 for workers under 50, and $25,000 for those 50 and older. In 2020, savers will get an even greater opportunity to sock away funds for retirement in a tax-advantaged fashion, because the annual contribution limits for 401(k)s are increasing to $19,500 for workers under 50, and $26,000 for those 50 and over.

Health savings accounts offer you a way to set aside funds that don't expire for medical expenses in a tax-advantaged fashion. Currently, you can contribute up to $3,500 a year to an HSA as an individual, or up to $7,000 a year at the family level. Those who are 55 and older also get an additional $1,000 catch-up on top of these limits. Beginning in 2020, you'll get the option to contribute up to $3,550 a year as an individual, and up to $7,100 as a family; and the $1,000 catch-up for folks 55 and over stays in play.

Flexible spending accounts let you allocate money for healthcare costs on a yearly basis, and those funds must be depleted annually or forfeited. Currently, you can contribute up to $2,700 in pre-tax dollars to an FSA, but beginning in 2020, that threshold is rising to $2,750. That means you get an opportunity to exempt even more of your earnings from taxes.

ALSO READ: 4 Ways to Avoid Losing Money in Your FSA This Year

If you commute to work, you can set aside a certain amount of money each month on a pre-tax basis to cover the cost of things like trains, buses, and parking. Currently, you can allocate up to $265 a month to commuting costs, but beginning in 2020, that monthly threshold is increasing to $270, which means you get to eke out a bit more tax savings.

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