How You Can Pay Less Taxes This Year (2018)

by Jason Yanes | 414 Services, Inc.

January 11, 2019 - With tax season coming up very soon (January 28, 2019 to be exact), many of us are wondering how the new tax laws are going to effect our tax returns this year. Like any new law, there are some good things and some bad things about it, and depending on your situation, you can end up paying less taxes this year.

We’ve created this cool infographic to show you what we think are the 5 best changes to the tax code. However, this doesn’t mean that you will be paying less taxes this year for sure. There are some other changes that can make you pay more, so it really depends on your specific situation.

Starting our top 5 changes to the tax code is the tax bracket rate reduction. The old brackets were:

Now the new brackets are:

Overall, most income levels received a decreased rate this year which is great. If you made $50,000 this year then you would end up having to pay $1,500 less in taxes than you would have last year.

Next, the standard deduction increased by almost double. If you decide to save yourself the hassle of itemizing all your expenses, you can choose to take the standard deduction, which will have more of an impact on your taxes this year. If you file your taxes jointly and opt to take the standard deduction this year, you will have a $24,000 deduction, which is $11,000 more than last year.

The child tax credit has increased drastically from $1,000 to $2,000 per child and now includes non-child dependents (elderly, handicapped, etc.), which give you a $500 credit each. This credit is also refundable up to $1,400 for qualified families. However, there are strict requirements that must be met in order to receive this credit.

Next, for business owners or those who are self-employed, there is an opportunity to receive a whopping 20% deduction if they report business income on their personal tax return. Before, this deduction was determined on an individual basis, but now it’s a 20% deduction for everyone who qualifies. Again, they must meet all the requirements to take advantage of this huge deduction.

Finally, the medical expense deduction threshold has been lowered, allowing more out-of-pocket expenses to be written off. The threshold has been reduced from 10% of income to 7.5% of income. If you made $50,000 in 2017, you would only be able to write off any out-of-pocket medical expenses over $5,000. If you made $50,000 in 2018, then you would be able to write off any out-of-pocket medical expenses over $3,750.

There are many other ways you can end up paying less taxes this year, however, we picked the 5 most impactful changes that will most likely save you the most money. Again, this is not a guarantee that you will end up paying less taxes this year because there are many other changes to the tax code, which may or may not affect you. To get a more personalized analysis of your taxes, visit us during tax season to get your income tax returns prepared and filed!