SACRAMENTO, Calif.--(BUSINESS WIRE)--Summer is in full swing, and tax season may feel like a memory in your rear-view mirror. Still, the year is half gone – an ideal time to review your current tax situation. Golden 1 Credit Union (Golden 1) is advising consumers to review their paystubs now.
What you need to know about the Tax Cuts and Jobs Act of 2017*
1. You may need to adjust your paycheck withholdings.
“Now is a great time to consider adjusting your federal withholding,” said Allyson Hill, Senior Vice President and Chief Financial Officer for Golden 1. “You can set aside an extra amount in a special savings account at Golden 1. That way, you can adequately prepare and be ready in case you fall short at tax time.”
Along with federal withholding, Golden 1 recommends Californians review their state withholding. Mid-year is a great time to make adjustments to ensure your tax bill for 2019 does not cause sticker shock.
2. Your tax bracket may have changed.
The new tax law temporarily modifies your income tax rate structure whether you’re a single filer or married filing jointly. Seven tax brackets remain; however, the income cutoff for each bracket and corresponding tax rate have changed. Visit the IRS website, or talk to your tax advisor, for details.
“Experts estimate the tax bill will result in a net reduction of $1.13 billion to taxpayers over the next ten years,” said Hill. “Not every filer will see a reduction. For your greatest potential tax savings, it’s wise to understand the new law and adjust your strategy now.”
3. The standard deduction, if you choose not to itemize, has increased as follows through 2025:
- From $6,000 to $12,000 for Single and Married Filing Separately
- From $9,550 to $18,000 for Head of Household
- From $13,000 to $24,000 for Married Filing Jointly
4. Certain exemptions have also changed.
- AMT (Alternative Minimum Tax) – AMT thresholds will temporarily increase through 2025 and eventually reach the $1 million threshold.
- Child Tax Credit – increases from $1,000 to $2,000 per child under 17 through 2025. A filer’s AGI (Adjustable Gross Income) threshold for the credit has risen from $110,000 to $400,000.
- Double Estate Tax – exclusion amount doubles from $5 million to $10 million per individual.
- Personal Exemptions – through 2025, the bill eliminates all personal exemptions, which will affect families.
5. Some itemized deductions have been repealed or limited (through 2025).
Under the new law, you can deduct mortgage interest debt on $750,000 or less – compared to $1,000,000 previously*. Home equity interest can still qualify as a deduction but only when combined with your first mortgage (at the $750,000 max), and when the loan is used to acquire, improve, or construct a primary or secondary residence.
Itemized deductions for state and local income taxes, state and local property taxes, and sales taxes also have new limitations – with a new $10,000 aggregate cap for all filers.
6. Golden 1’s Financial Wellness Portal is another way to help you understand taxes. The “Taxes” Learning Lab Module offers steps you can take to improve your tax situation.
While paying taxes is a certainty, preparing your own strategy is one part of the process you can control.
*Please consult your tax advisor for details on your situation.