Last Friday we sent an e-mail about the looming tax season for 2017 income taxes. In it, we discussed various 2017 income tax provisions, such as the standard deduction, itemized deductions, exemptions, phase outs, et cetera. But other than filing our returns to comply with the tax law, 2017 is in the rearview mirror.
For 2018 and beyond, a new tax law was recently enacted by Congress and signed into law by the President. It contains some of the most sweeping changes to the tax code in decades. While much has been made of the new initiatives on the business side, there are also significant changes for us as individuals.
We will delve into many of these changes in future editions over the next several weeks. But first, let's begin our discussion of the subject of income taxes by highlighting two of the articles under the education tab on our website.
First, click on this link to an article under the Tax tab: Understanding Marginal Income Tax Brackets. As you can see, the income tax is progressive in nature, meaning it is structured with higher tax rates on those taxpayers with a greater ability to pay. A person's tax bracket is not the rate of tax they pay on all their income; it is the rate applied to the next dollar of income they receive. The new 2018 tax act will still have seven brackets, but as we will see later, most of the tax rates and income thresholds will be changed.
Next, please click on the link discussing estimated taxes: You May Need to Make Estimated Tax Payments If. Since Washington politicians in their (infinite) wisdom deemed it appropriate to tax Social Security (that is taxing a tax for those who are keeping score), many of our retired clients need to send quarterly estimated tax payments. Because of imputed taxes, there are some clients whose income is mostly W-2 wages who need to pay the quarterly estimated taxes also. And, invariably, the requirement to pay estimated taxes changes from one year to the next.
As you explore the articles and videos on our website you will see that some are conceptual and unchanged by the new tax law. Others are more specific and have been changed dramatically. Remember this new tax law contains some of the most sweeping changes to the tax code in decades. We will soon return to this rather disagreeable subject of income taxes and discuss these changes in more detail, as well as their impact on you.
Until next time, cheers!
Jim