How do the new US tax reforms affect US connected persons?
Find out how the changes could affect you, from Child Tax Credit to Healthcare and Charitable Giving
By Beacon Financial Education
The coming in of a new administration comes with a lot of changes. Some of these new changes include the scratching of old bills and the passing in of new ones. A new act known as the Tax Cuts and Jobs Act was passed by the US Congress in December 2017. The new law is also known as the Trump tax plan.
You already know by now that the passing of a new bill brings a lot of uncertainty. The new Tax Cuts Act will have an impact on businesses and individuals. The law is not that simple. It will take time for the majority of us to understand as new laws are associated with a lot of complexity.
However, that should not leave you in despair. This article irons out some parts of the Act and how they will affect US taxpayer's finances.
How the new Act affects you and your loved ones
Child tax credit
There was no change in the child tax credit between 2016 and 2017. Everything remained the same. All the children who reached the age of 17 in 2017 can no longer be part of the child tax credit. You need to get your child who was born in 2017 a social security number as soon as possible. This will help you to get a refund but you need to bear in mind that you have to get the social security number before the deadline of the tax return.
The year 2018 seems to be the year when the child tax credit is finalized after a long time. The total credit increases to $2,000/child and only $1,400 is refundable. Those who qualify to apply for it have a new high threshold of $200,000 for singles. The threshold for married couples is $400,000. This is good news as the law now allows individuals and families with high incomes to take full advantage of the new tax benefit.
Corporate tax received a huge reduction from 35% to 21%.
The Affordable Care Act in the Tax Cuts Act saw a few changes. One of the biggest changes was the removal of the penalty of individuals who have no healthcare insurance in 2018 and beyond.
Giving to charity is one of the most humane things to do. It gives you an overwhelming sense of humanity and responsibility towards a better society. Giving to charity also helps you get a tax benefit. The charitable tax laws are changing and less people will be able to take these deductions. However, even if this happens and there is no tax benefit to your charitable giving, continue giving to those in need.
State and city taxes
The new law will not offer any benefits to people who pay high taxes at state and local levels.
The new tax law and the future
Taxpayers will see a lot of changes in the new law. These changes will take time for individuals and businesses to adjust to them. People and businesses need to be aware of the new tax laws so that they can find ways to plan ahead. You should not forget to capitalize on the new benefits.
Want to know more about US taxes, US FATCA compliant wealth management and/or how your investment portfolio can assist you offsetting your tax liabilities?
Beacon Financial Education does not provide financial, tax or legal advice. None of the information on this site should be considered financial, tax or legal advice. You should consult your financial, tax or legal advisers for information concerning your own specific tax/legal situation.