The Tax Cuts and Jobs Act that Congress passed last December produced some winners and some losers among different categories of taxpayers. With Congress now considering new legislation to extend some expiring tax breaks along with correcting technical problems with last year’s tax overhaul and fixing the IRS, one company is providing a list of the biggest winners of the TCJA.
Earlier this month, TaxAudit, a tax audit defense service, came out with a list of the biggest losers (see
- Homeowners: Those with home mortgage loan amounts above $750,000 and equal to or less than $1,000,000 for home acquisition, building or improvements, where the loans were originated prior to or on Dec. 15, 2017.
- Itemizers: Taxpayers in states with low or no state income tax rates and property tax rates, and whose combined state and local taxes are below $10,000, and whose total itemized deductions exceed the new standard deduction.
- Self-employed taxpayers: Self-employed taxpayers whose income is within the limits for the new Section 199A deduction for business will benefit from the new 20 percent deduction.
- Retirees: Some retired individuals may benefit from the increased standard deduction if they have not been able to itemize in the past. They may also benefit from a lower marginal tax rate.
- Parents and taxpayers with dependents: Taxpayers whose children are under the age of 17 will benefit from the increased Child Tax Credit which has a much higher income limitation, while eligible taxpayers with non-child dependents will benefit from a new $500 credit.
- Wealthy taxpayers: High-income taxpayers will enjoy lower tax rates, while people who will inherit extremely large amounts of money will benefit from the estate and gift tax exemption for 2018 being increased to $11,180,000 after considering the necessary inflation adjustment on $10,000,000.
- Soon-to-be divorced taxpayers: Taxpayers who must pay alimony and whose divorces were finalized before Jan, 1, 2019. will still be able to deduct alimony. The deduction of alimony will no longer be a valid deduction for those that are divorced after Dec. 31, 2018. Similarly, taxpayers who receive alimony and will have a final divorce decree after Dec. 31, 2018, as the requirement to include alimony as income is no longer required.
Tax tips
TaxAudit also offered some tax tips for taxpayers to help them maximize their tax refunds:
- Certain factors, such as a home office (not as an employee, however), can help to maximize your home mortgage interest deduction.
- Taxpayers with foreign taxes paid generally would benefit by using Form 1116 if they are over the $10,000 limit.
There is a new $500 credit for eligible taxpayers who support a dependent that is not eligible for the Child Tax Credit.
“Tax professionals have spent a lot of time this year understanding how the new tax law will finally impact taxpayers this coming season, and it’s becoming clearer who the likely winners and losers of the tax overhaul are,” said TaxAudit chief customer advocacy officer Dave Du Val in a statement. “Whether or not you benefit under the new tax law, it’s important to take the time to understand the new rules for proper tax planning for 2019 – and now is the time to do it. No one should have to pay the IRS more than they legally owe.”
