If you’re like a lot of time-crunched lawyers, you’re just now getting around to your taxes.
You’ve probably heard some grumbling about stark differences between tax refunds from 2017 and tax refunds from 2018—and that grumbling is not always the happy kind. It’s true that there have been some changes in the tax laws, and whether those changes will be positive or negative depends on your situation.
In the beginning of 2018, Congress passed the largest piece of tax reform legislation in more than three decades, affecting most taxpayers. The list of changes is long, but let’s focus on the ones that will have the biggest effect on the most people.
Standard deductions: The new standard deductions are higher—$12,000 for single filers, $18,000 for heads of household and $24,000 for married people filing jointly. You have always had the choice to itemize or take the standard deduction, but the higher standard deduction means that itemizing won’t make sense for most people.
State and Local Income Tax (SALT) deductions: The new law limits deductions to $10,000. This will make the biggest difference to those in states with the highest property taxes, like New Jersey, California, and Illinois.
Medical expense deductions: It used to be that medical expenses had to exceed 10% of your annual income before you could deduct them. Now you can deduct those expenses if they exceed 7.5%, but only if you itemize.
Increased child tax credit—but no more dependent exemptions: Parents used to be able to take exemptions up to $4,050, but that’s gone. The child tax credit has been raised from $1,000 to $2,000. There is also a new $500 credit for non-child dependents, which includes elderly parents and children over the age of 17.
Moving expenses are no longer deductible: But if your employer reimburses you for moving expenses, it is no longer taxed as income.
529 accounts can now be used for K-12: These accounts were previously only used for college expenses, but parents can now use them to pay for private school tuition.
If you end up owing more than you did last year, you can always adjust your withholdings on your W4 to get a different result next year. Try the IRS withholding calculator here to figure it out. The sooner you make any changes, the better.