With the new tax reform in full effect, it’s important to know how it will affect you specifically. If you are a millennial, you may not be aware of the changes and benefits that will impact you.
What You Should Know About the Tax Law As A Millennial
The most immediate impacts that tax professionals say will impact millennials are the following. These are in effect for the 2018 tax year through the 2025 tax year.
Your Paycheck May Increase as Millennials
Because the tax law aims to increase U.S. gross domestic product GDP, the Tax Foundation estimates that the tax law will increase after-tax incomes for all taxpayers by 1.1%.
No More Personal Exemptions
According to the tax plan, personal exemptions are going away. That means that you cannot deduct for yourself or your dependents. The increased standard deduction is meant to offset the “no more personal exemption” inclusion.
Reduction of Mortgage Interest Deduction
If you are planning to buy a home from 2018 through 2025, your mortgage interest deductions will be capped lower. With the new tax law in place, the deduction limit will be applied to $750,000 of debt on your primary residence. However, if you bought a house before December 15, 2017, you can still claim the deduction using the old limit of $1 million. You should also note that the deduction for interest on home-equity loans and HELOCs goes away for 2018. Without the deduction, borrowing will now cost you more.
The Student Loan Interest Deduction Will Remain
Moving Expense and Job Search Deductions Disappear
You can no longer be able to deduct any costs for moving or job searching.
State and Local Tax Incentives/Deductions Will Be Limited
There are now limits on state and local tax deductions. The deductions for these taxes cannot exceed a total of $10,000. This is most likely to affect taxpayers living in states with high costs of living.
The Standard Deduction Increased
For 2018, the standard deduction increased to $12,000 for single filers, $18,000 for the heads of households, and $24,000 for married couples filing jointly. These limits nearly double what was allowed in 2017. This means that there is less income you pay taxes on.
The Child Tax Credit Expanded
The Child Tax Credit is available to families with qualifying children who fit within the income thresholds. For 2018 the credit doubled from $1,000 per child to $2,000. The tax law also raises the limit to qualify. Married couples who earn up to $400,000 can now claim the credit. The first $1,400 of the credit is now refundable under the tax code.
Commuters May Have to Pay
You may have to cover your own commuting costs from now on. That’s because the tax law eliminated the deduction for companies. Your employer may still offer commuter benefits, but they will not have the incentive of a deduction.
If you have further questions about the tax law, please contact Engineered Tax Services directly at EngineeredTaxServices.com or call (800) 236-6519.