The Ultimate FAQ for New Tax Reform
This April, you’re going to notice some new changes when you file your taxes. New tax reform has switched up everything from forms to deductions, but don’t worry. We’ve got you covered with this quick and simple FAQ guide.
1. What is the TCJA?
The TCJA stands for the Tax Cuts and Jobs Act, a new tax reform bill passed in 2017. This major tax legislation imposes several changes to tax brackets, regulations, and more.
2. Who is impacted by the TCJA?
The short answer? Practically everyone. The reform includes new legislation that affects almost all U.S. individuals, businesses, and even government entities and tax-exempt organizations.
3. When does the TCJA take effect?
Most changes took effect on January 1, 2018, so you’ll encounter them for the first time this tax season. A few changes, like the elimination of the health insurance tax penalty, kick in starting in 2019. The legislation is slated to end on December 31, 2025.
4. Are my business expenses still deductible?
Yes! All businesses (even businesses of one!) can still claim expenses like mileage, phone bills, and office supplies to reduce their taxable income. Check out the full list of expenses on our Stride Tax app if you’re not sure which ones you can deduct.
5. Can I still qualify for my health insurance subsidies?
Yes! Although the health insurance penalty was removed, much of the Affordable Care Act is still in place, including the Premium Tax Credit. Depending on your income, you can still apply for and receive subsidies that help lower the monthly price of your health insurance.
6. Will I get penalized for not buying health insurance?
As of 2019, the Individual Mandate Penalty no longer exists. This means that you will not be penalized if you go uninsured in 2019... but you may still owe a fine if you didn’t have eligible coverage for more than two months of 2018.
7. What’s happening to the standard deductions?
The standard deduction is a fixed dollar amount that taxpayers can use to lower their taxable income instead of itemizing their deductions. The TCJA raised this deduction amount, meaning you can lower your taxable income accordingly. Please note that the standard deduction amounts before the TCJA shown below are what they would have been for 2018 without the TCJA. These are not the 2017 amounts.
NOTE: These amounts will be indexed for inflation on an annual basis.
Because the standard deduction is increased, many taxpayers may find it simpler (and beneficial) to no longer itemize individual deductions.
8. What’s happening to personal exemptions?
The TCJA suspended personal and dependent deductions through 2025. However, other new tax reform changes may help you earn those savings back.
9. Were any deductions favorably impacted by the TCJA?
Yes! While some deductions (like home mortgage interest and casualty losses) have been reduced or eliminated, a few deductions were favorably altered:
Charitable contributions: You can now deduct cash contributions to public charities up to 60 percent (previously 50 percent) of your adjusted gross income.
Medical expenses: This year, you can deduct unreimbursed medical expenses from 2018 if they go over 7.5 percent of your adjusted gross income. This deduction will go back to 10 percent next year when you file your 2019 returns.
10. Will my tax forms look different?
The Form 1040, which you use to file your annual income tax return, is now a bit shorter. You may need to fill out additional forms for things like non-wage income (e.g. business income) or deductions (e.g. the self-employed health insurance deduction). The good news? If you file online or with a tax preparer, you won’t notice this difference!
11. Are the deadlines different?
Nope! Tax season has officially begun, and the final deadline to file your return (or an extension) is Monday, April 15, 2019. Don’t procrastinate, though! There are lots of benefits to filing early. Keep in mind that you may notice a slower turnaround time on your refund as the IRS gets up to speed with the new changes.
Have a tax question we didn’t cover? Send it our way at firstname.lastname@example.org.