The Details of Tax Cuts and Jobs Act
The tax cuts and jobs act (TCJA) which was signed in December 2017 was focused on four things. Those four things are:
- Tax relief for middle-income families
- Simplification for individuals
- Economic growth for families
- Repatriation of overseas income
My goal is to provide some digestible information for the preparation of taxes in 2019. Within this post, I will not be covering the repatriation of overseas income. This is for middle-class Americans. For business owners, I would advise you contact me or reach out to your tax advisor as your tax planning strategy may already have some provisions in place for you.
Tax relief for middle-income families
Part 3 of The GOP’s TCJA brought a significant break to American families. For instance the standard deduction went from $6,500 to $12,000 for individuals and $13,000 to $24,000 for married filers respectively. This gives so much room for those families who were not able to use itemized deductions because they did not have a home to take advantage of the mortgage interest deduction. In addition to that, (see section 11022) provided an increase to of an increase $1000 to the child tax credit. This brings the credit up to $2,000 for a qualified child. If you have any questions on how this affects you, do not hesitate to send me an email.
Simplification of tax preparation for individuals
I’ve detailed the some of ways the TCJA simplified the tax code for us. Again, let’s look at the simplification of the tax code in more detail. The elimination of the personal exemption until December 31st, 2025 (See section 11041) means you as the taxpayer will look for tax savings in other areas. For the most part, the exemption isn’t as significant as the doubling of the standard deduction, pat yourself on the back for that GOP. On top of that, simplifying your taxes puts more time into a professional preparers tool box and you as the taxpayer can go back to spending more time with your family. The Tax foundation created so many cool spreadsheets to break some of this down, see more here.
Economic Growth from the Tax Cuts and Jobs Act
Going back to school is not why I am writing this post for you today. However, I did want to provide my own analysis on the benefits of reduced taxes for corporations. We turn on the television or in my case, YouTube and hear about many jobs being sent to other countries. With this tax bill, it helps employers improve the economy by investing in hiring for things that are not as crucial to the bottom line in the short term but do benefit them i years to come; such as new hiring training, research and more. The reason being is the tax on capital investments isn’t as painful and interns, entry level workers and more can come on board and contribute to the bottom line.
In a few years, these same employees will become the managers and leaders of the corporation. Providing more value not only to the company but the economy as a whole. This puts a smile on the municipality that they reside, consumer companies and more.
To sit down with myself or any other tax professionals, do not hesitate to email me.