The recent tax plan passed by Congress in late 2017 went into effect at the beginning of this year, inciting the biggest change to U.S. tax law in decades. Many of the new implications are complicated to understand, so it’s important to turn to a knowledgeable accountant for help. With more than 20 years of tax return preparation experience, the professionals at Gillette & Associates LLC CPA are qualified to provide the residents of La Crosse, WI, with a better understanding of the tax reform bill. Below, they go over some of the most frequently asked questions on the subject.

Accountant Answers Common Questions Concerning Tax Reform 

1. How Will the New Tax Brackets Affect Future Tax Liabilities?

The new tax plan has seven brackets that individuals may fall into, ranging from 10% to 37%, with the top percentage applying to taxable income in excess of $500,000 for single filers and $600,000 for those filing jointly. With the help of an accountant, taxpayers can apply these rates to see what their estimated tax liability will be for next year. 

2. What Changes Are Being Made to Standard Deductions?

One of the biggest differences made to the tax code is that the standard deduction has almost doubled. Taxpayers have had the option for years of either taking the automatic reduction in their tax obligations or itemizing their deductions by listing each expense one by one. While it wasn’t uncommon in the past for itemized deductions to equal much more than the standard deduction, this might no longer be the case with the significant increase. In addition, personal exemptions are being eliminated, simplifying the way standard deductions are calculated. 

3. What Happens to the Alternative Minimum Tax? 

The Alternative Minimum Tax was initially put in place to prevent high-income earners from taking an abundance of tax breaks and not paying their taxes properly. Over time, this started affecting more and more families in the middle class even though it was never intended for them. The Tax Cuts and Jobs Act addresses this issue by making the minimum AMT exemptions much higher so it no longer impacts average wage earners. 

4. How Does the Tax Plan Affect Business Taxes?

Under the new tax law, large corporations and small businesses will both get tax cuts. The rate for corporate taxes will be cut down to 20% and small business owners will pay at the 25% rate. These tax cuts were imposed with the idea that companies would be encouraged to invest back into their communities more, creating an increase in local jobs.

It’s imperative that you are aware of the changes to the tax code so you can adjust your finances and withholdings accordingly. An accountant from Gillette & Associates can help with your personal or business tax return for next year to ensure your documents are prepared error-free. Contact them at (608) 784-8355 or visit their website for more information.