With 2017 nearly at a close, it’s time to start thinking about tax year 2018 and considering some last-minute moves that might improve your overall tax position, both for this year and next. Income-tax brackets could change in 2018 if tax legislation is enacted under President Donald Trump. The Senate’s bill proposes keeping seven tax brackets but changing the income ranges, while the House’s version of the bill would reduce the number of tax brackets to four.Both plans propose eliminating the personal exemption and increasing the standard deduction
Under the House’s plan, there would be four federal income-tax brackets rather than the seven we have today. The brackets proposed are 12%, 25%, 35%, and 39.6%.
The Senate’s version would keep seven brackets but at slightly lower rates and adjusted income ranges. The brackets proposed are 10%, 12%, 22%, 24%, 32%, 35%, and 38.5%.
About 70% of Americans claim the standard deduction when filing their taxes, and their paychecks will almost certainly increase — albeit slightly — if tax reform passes.
In 2017, the standard deduction for a single taxpayer is $6,350, plus one personal exemption of $4,050.
The House plan would combine those into one larger standard deduction for 2018: $12,200 for single filers and $24,400 for joint filers.
Under the Senate proposal, these would be slightly lower, at $12,000 for single filers and $24,000 for joint filers.
Even in the current bull market, you will want to review your investment portfolio for underperforming duds. Taxpayers with large amounts of taxable gains in 2017 may want to offset some of those by realizing losses to lower overall capital gains exposure.
Finally, taxpayers will want to be aware that many mutual funds make capital gains distribution in December. You’ll want to keep that in mind when buying or selling since a major distribution may add to your eventual tax bill.
If you have any questions or would like to know how these or other potential changes may affect your personal tax position, please don’t hesitate to contact your HW & and Associates professional. We can review your current and projected tax picture and recommend any adjustments on withholdings or investments to provide optimal benefit to both you and your beneficiaries.