In December 2017, the Trump administration signed a new tax plan into law. And while much of it won't affect private individuals, there are several changes that may very well save you and your family money.
529 Plans are no longer just for college
Although another educational savings plan already exists for K-12 – the Coverdell ESA – it comes with contribution limits and income restrictions. The 529 plan has none of those limitations and, thanks to the new tax law, can now annually fund up to $10,000 tax-free toward private school tuition. Even if you already existing Coverdell ESA, you can roll it over into a 529 with no tax consequences.
Obamacare penalty's coming to an end
For those who can’t afford health insurance, there will no longer be a penalty for not having it. The individual mandate penalty imposed for these individuals will be repealed in 2019, saving some families up to $2,085.
Increased standard deduction makes itemization less attractive
As a quick refresher, itemizing means you report each of your qualifying expenses on your 1040 form, rather than taking the standard deduction – a set amount dependent on your status as a taxpayer.
Before the new tax code was introduced, taking itemized deductions was often the better way to go, saving many tax payers thousands of dollars. However, it also required really extensive record-keeping. But with the reform bill, the standard deduction has been doubled, making it the far more attractive option for many Americans.
But will you pay less?
Due to changes in income tax brackets and deductions, you may very well save on your taxes for 2018. And if you are a business owner, there are more options available to you. For example, if you purchase a new car instead of leasing it, you can take an $18,000 deduction for the first year you own it. And if it's an SUV or truck, it is 100% deductible.
For a closer look at how much you could save, check out this tax calculator.
Although tax reform can be confusing, you're not alone. Reaching out to a financial advisor can help you understand how the changes will affect you personally, giving you the confidence and peace-of-mind that you're still on your way to your bigger, better future.