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5 Tax Changes You Need to Know for 2018
Recent updates from the IRS and major tax reforms passed by Congress could significantly alter your situation for the 2018 tax year. Below are five changes that may affect you:
1. Standard deductions - Those who are married and filing jointly will have an increased standard deduction of $24,000, up from the $13,000 under previous law. Single taxpayers and those who are married and file separately now have a $12,000 standard deduction, up from the $6,500 it was prior to the reform. For heads of households, the deduction will be $18,000, up from $9,550.
2. Child tax credit - The child tax credit has been raised to $2,000 per qualifying child (under 17), up from $1,000. A $500 credit is available for dependents who do not get the $2,000 credit.
3. Income tax rate - The new tax law includes changes to rates for both single and married tax brackets. Most brackets will see a cut of 1% to 4%.
4. State and local taxes - The itemized deduction is limited to $10,000 for both income and property taxes paid during the year.
5. Mortgage interest - The deduction for interest is capped at $750,000 for mortgage loan balances taken out after December 15, 2017.