What you Need to Know About the Tax Reform Bill
Even though the tax reform bill brought some big changes, it made a lot of things simpler.
It is fairly common for income brackets and tax rates to change to account for inflation each year. Marginal tax rates on the other hand only change when new tax law is passed, this doesn’t happen frequently. That’s why this part of the tax reform bill was particularly interesting to a lot of people.
The good news is, this year lower marginal tax rates means you can pocket more money from your paycheck. Not only is there a lower tax rate this year, but the shift in tax brackets also removed an unintentional tax penalty for married filers. Under the 2017 tax law, some married filers, after they combined their income, got pushed into a higher income bracket. Now the new income brackets are simply doubled for joint filers, meaning that this unintentional marriage penalty is gone.
Another important difference in the 2018 tax reform bill is that the standard deduction has almost doubled. This is also good news. Essentially, what the tax reform bill did was simplify this portion of the income tax process. In several instances, this increase in the standard deduction will make up for the elimination of personal exemptions and as a result, leave many Americans with extra money.
There is a difference in Child Tax Credit, in 2017, if parents were making less than $100,000 jointly and $75,000 individually, the child tax credit qualified them to receive $1,000 if they were under the age of 17. Now the new tax reform bill increased that credit to $2,000 per qualified child. It also raised the income limits for the credit to $400,000 jointly and $200,000 individually which means a lot more people are going to be able to receive tax credits for their children.