Tax season is rapidly approaching, and according to the Internal Revenue Service, the last day to file your 2018 taxes is April 17th. However, because of certain changes caused by the tax reform bill President Trump signed into law in December of 2017, you may not be sure how to proceed with filing or how these modifications could affect you. If you plan to file jointly with your spouse and have children, there are several benefits to the new tax laws that might surprise you.
- Lower Medical Expenses Cap
Medical costs for your family likely have a serious impact on your budget. Doctor and dental visits, along with expenses such as eyeglasses, medications, and unexpected medical emergencies, can total thousands of dollars per year. Even with insurance, families are struggling; one report noted that health insurance for a family of four costs over $28,000 annually, and that amount has been rising steadily each year. However, the new tax laws may offer you some relief in this area.
Before Trump’s modified tax bill, you could only deduct your family’s medical expenses if the costs equaled or exceeded 10 percent of your gross income for that year. Under the new law, you must only meet 7.5 percent of that amount, which could make it simpler for you to reach that threshold.
- Larger Child Tax Credit
Child tax credit laws have also undergone a few changes since the reform. These changes could benefit you greatly if you have more than a few dependents and are hoping for a substantial refund. In the past, you could receive $1,000 for each dependent. That amount has now been doubled to $2,000, and additional tax credit laws now allow up to $1,400 of that total to be refundable per child.
It is important to note that if your income and taxes are affected by alimony, you are no longer able to deduct what you have paid over the year and that any child support payments made might also affect the child tax credit you receive. Ask your tax professional about these factors before you file.
- Greater Standard Deduction
Filing jointly with your spouse can net you a larger standard deduction under the trump tax reform. While personal exemptions for individuals and their spouses are no longer applicable, the new standard deduction for those filing jointly is significantly higher than in previous years.
For example, if you are married and filed jointly with your spouse in 2016, you received just over $12,000 as a standard deduction. The new law offers you $24,000 under these circumstances, which could benefit you and your family and result in a higher refund than in previous years.
- Educational Benefits for Younger Children
If you want your young child to attend private school, a new educational tax break now allows you to use certain college savings plans to cover those expenses. From kindergarten to high school, you may now use these funds to pay for private education, no matter which state you live in.
President Trump’s new tax reform may seem confusing at first glance. However, it has several features that may benefit you and your family when it comes time to file in April.
