Speaker of the House Paul Ryan, R-Wis., speaks after the House passed the Republican tax bill. Republican lawmakers said they wanted to simplify the tax code so you could file your return on a postcard. It turns out the new 500-page tax law will be anything but simple for many affluent Americans, who are now inundating their accountants for advice. What Happens Next, Month by Month President Donald Trump signed into law the sprawling tax bill that was hastily built out by Republican leaders over the past month. In doing so, he formalized a huge range of changes to how Americans — and Much of the detail of the law will be established after the IRS releases new regulations stemming from the changes that Congress made — a rolling set of updates that will come over the next year. Without further ado: What to expect from the changes to the tax code.
Jan. 1, 2018 The new law comes into effect — but the effects won’t be felt immediately. Talking to tax advisers early in the year to plan for how the new law affects you is the motto of the day. For example, it may be worth it for some people who earn certain types of income to become independent contractors, allowing them to take a 20 percent deduction on that income. But, again: Talk to someone who does this for a living. Among the changes that begin in January are an expansion of what are known as “529” plans. These were formerly reserved for saving money for college, but the new law expands their use to include paying for K-12 education as well. This will mostly benefit wealthier individuals whose kids attend private schools, but, if that’s you, take advantage. If you’re looking to buy or refinance a house, be aware that the mortgage interest deduction will be capped at $750,000 as of the first of the year instead of $1 million. If you are planning on buying a new house or refinancing, doing so after Jan. 1 will mean different considerations in doing so. Another change is the increase in the threshold for the estate tax. If you are a wealthy person who dies on Dec. 31, more of your estate can be taxed than if you die the next day. Take that into account when you are thinking about when you plan to die. As of the first of the year, businesses will start seeing lower tax rates. The grand theory behind the Republican plan is that this benefit will trickle down to everyone else in the form of new jobs and higher wages. Some stockholders will likely see benefits right out of the gates, as companies buy back stock.
February 2018 In February, the IRS will publish new tax rates. (For individual taxpayers, there are a range of brackets that determine how much is paid. For businesses, it’s much simpler.) As it stands, your paycheck withholds a certain amount of money to pay your federal taxes. On Jan. 1, the amount that’s withheld will likely be too high, since most people are getting a tax cut beginning next year. But we won’t know until February — when the IRS releases the new rates — how much you’re overpaying. (You’ll get those overpayments back after you file in 2019.) The upshot is that, once the IRS publishes the new rates, you’ll have less taken out of your paycheck in taxes.
April 2018 Filing your taxes Not much will be different than when you filed this year, since you’re paying on your 2017 earnings. If you did pay more on your medical bills, though, this is where you’d see that deduction kick in.
Before the end of 2018 Alimony payments.
Currently alimony is deductible by the payer and income to the recipient. The Act would retain that treatment for divorce agreements completed through 2018. For divorce agreements entered into after December 31, 2018, or preexisting agreements that are modified after that date to include this provision, alimony would no longer be deductible by the payer and would not be includable in income to the recipient. Jan. 1, 2019 The Obamacare individual mandate ends, meaning that the requirement that you either have insurance coverage or pay a fine goes away. You may now simply not have medical insurance as you desire and not have to pay extra on your taxes.
April 2019 Filing your taxes You’ll get more money back after filing your taxes this year, thanks to your overpayment in January and February of 2018. The alternative minimum tax also goes up for this filing. 2026 The individual tax cuts expire, unless renewed by Congress.