Will your income tax increase or decrease in 2018?
Fortunately for most people, income taxes will probably decrease by 10% – 20% from the 2018 tax changes. However, millions of taxpayers will have tax increases of $3,000 – $5,000 and may need to start saving money to pay their taxes.
Whose income taxes will increase?
Although the standard deduction increased to $12,000 for single and $24,000 for married filing jointly, exemptions which were $4,050 per person have been eliminated. The loss of exemptions will offset some of the larger standard deduction. If you itemized your deductions in previous years, you should check your taxes for 2018. If your combined itemized deductions and exemptions were more in 2017 than the 2018 standard deduction, you might be paying more in taxes. As an example, if you were single with no dependents in 2017 and your itemized deduction were $11,600, you would have also had an exemption of $4,050. This would have reduced your taxable income by $15,650. In 2018 you would claim the $12,000 standard deduction because it is larger than your $11,600 in itemized deductions. However, with the loss of your exemption in 2018, your taxable income would only be reduced by the standard deduction of $12,000, compared to $15,650 in 2017.
The employee business expense deduction has been eliminated for 2018. Some of the taxpayers with the largest tax increases will be people who claimed employee business expenses in previous tax years. This would include over the road truck drivers, traveling salesman, home health care professionals and anyone else who claimed the employee business tax deduction. Over-the-road truck drivers typically have about $16,000 in employee business expenses in meal per diem deductions and truck expenses. Traveling salespeople and home health care workers who drive about 30,000 miles a year would also lose a mileage deduction loss of about $16,000. Additionally, with the loss of exemptions, this could easily increase their taxes by $3,000 to $5,000 depending on other circumstances.
If you itemized your deductions in previous years and are not sure how your taxes will be affected, you may want to contact your tax professional as soon as possible. This will allow you time to prepare in case your income taxes increase.
David Zubler is the author of three tax books and a philanthropist. All of the proceeds from the books go to a charitable foundation he created for underprivileged children. He is also the founder of Your Tax Care.