Well, no updates since 2017 is kind of sad, but indicative of how busy we have been servicing our clients. The first tax season with the new provisions of the Tax Cuts and Job Provision Act is almost behind us, and there is quite a bit to reflect on.
The Tax Cuts and Job Provision Act of 2017 had a big effect on the 2018 individual tax returns I prepared this year. One of the biggest ones, that is near and dear to my heart, is the tax return for my grandmother. Affectionately known as “Mamo”, my grandmother is 98 years old and lives in a memory care unit. She was an astute investor and a hard worker, so her assets provide the income to pay for her care. Her tax return for 2018 was much the same as her return for 2017; she itemized her deductions because of her expensive medical care and her income was about the same from Social Security and her investments. The standard deduction was raised with the new act, but Mamo had enough medical expenses to be able to itemize. The end result for her in 2018 was that she owed taxes. Due to the Tax Cuts and Job Provision Act of 2017, she lost her personal exemption, and as a result, owed income tax.
Returns I prepared for young families had a different result. Most of the young families with children received nice refunds. Case in point are the returns for my two daughters and their families. The Tax Cuts and Job Provision Act increased the child tax credit from $1,000 to $2,000 for each child under the age of 17 and provided a $500 credit for other dependents. The Act also increased the income thresholds for qualifying for the child credit. Before the Act, when my girls were under the age of 17, my income was too high to qualify for the credit. The income thresholds increased from $110,000 AGI for married filing jointly to $400,000.
Important to note, refunds are based not only on the tax law but on your withholding and estimated tax payments. The goal isn’t to receive a large refund, but to pay in enough to avoid any penalties.