Chesterfield, VA (InvestigateTV) – Tax season is here, and this is the first time everyone is experiencing what it’s like to file under the most sweeping changes to the tax code in 30 years.
From discussing lower tax brackets to higher standard deductions, InvestigateTV teamed up with NerdWallet to learn what to expect when tackling taxes this year.
Ron McKay is know as the “bug dude.” It’s on his license plate because he owns a pest control business. He’s been squeezing into crawl spaces for nearly 40 years.
Thirteen years ago, he moved his family to Chesterfield, VA and opened his own extermination business. To keep up with his finances, McKay said he saves just about every receipt.
"Different receipts for different things that I buy and truck costs,” he said. When it comes time to file his taxes, this small business owner is ready and turns his documents over to a tax professional.
"Numbers are not what I'm good at. That's not my thing. I'm into pesticides and killing bugs and mold and fungus.”
Even though he gets help with the paperwork, this year, like a lot of Americans, he has some questions.
“What I’m really concerned with is where’s it going to affect me?” McKay said. McKay’s question is in reference to the Tax Cuts and Jobs Act: A sweeping overhaul of the U.S. Tax Code, passed by Congress in 2017 and affecting tax payers this year.
“Overall tax rates have gone down. So, many Americans may see a smaller tax bill this year. The catch with that is everybody’s situation is different. So, it’s hard to generalize,” said Kelsey Sheehy, a personal finance expert with the financial website NerdWallet.
Sheehy said the biggest change is the standard deduction. It nearly doubles this year.
Single filers jump from $6,350 in 2017 to $12,000 this year. Those that are married-filing-jointly go from $12,700 in 2017 to $24,000.
“That's going to reduce people's taxable income. It's also going to make it a lot easier to file your taxes because taking the standard deduction is just faster and easier than itemizing every single deduction,” Sheehy said.
For those paying someone to prepare taxes, it's going to be easier and faster for them as well, which could save the client money.
Use NerdWallet’s calculator to see how tax code changes affect different income brackets and scenarios.
There are several other changes, including: more people may qualify for the child tax credit this year, which has doubled to $2,000 per qualifying child. When it comes to homes, owners can only write off the interest paid up to $750,000 of mortgage debt instead of $1 million. This applies to homes bought after December 15, 2017. Additionally, you can now only deduct up to $10,000 in property tax.
For educational costs, if you have a student loan, there’s no change in filing this year, but 529 college saving plans have been expanded.
“You'll be able to use that to pay tuition on private elementary schools, middle schools and high schools, which in year's past you haven't been able to do,” Sheehy said.
In theory, more people will have lower tax bills, but individual results still depend on a long list of factors.
McKay, the small business owner, is now hopeful the process will be easier in filing this year.
“I mean it looks pretty promising to me what I’m seeing so far. It looks almost like it’s structured to help out small businesses,” he said.
Taxpayers can begin preparing returns as soon as they receive all tax documents. The IRS recommends filing electronically for a faster refund. The agency also pointed out filing early also helps lessen the chances that criminals will fraudulently file in a taxpayer’s name before he or she has done so.
To learn more about the tax code changes, watch the extended video interview below:
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