On January 1st of this year, new tax rates went into effect that will result in sweeping changes for taxpayers. Understanding changes to tax rates and other areas is crucial to ensure you can make the best possible decisions when you file your taxes next year. The following highlights some of the most important differences to be aware of.

Tax Rates

The amount of your taxable income determines which tax rate you’ll be afforded. It also depends on your marital status and whether you’re filing jointly or separately. As an example, a married couple filing jointly with a taxable income ranging between $77,401 to $165,000 will have 22% of their income taxed. 22% is also applicable for individuals with an income between $38,701 and $82,000. Estate and trust tax rates have also changed. When income from estate plans is between $9,151 and $12,500, the tax rate is 35%.

Standard Deductions

The standard deduction can help lower your tax bill, as it is an amount of your income that is not subject to taxes. New legislation made changes to standard deduction amounts, which vary depending on your status. For instance, single filers are privy to $12,000, while married couples can deduct $24,000. If you are the head of household (which single/unmarried people can use if they live with a child or relative in need of assistance), you can now deduct up to $18,000.

Earned Income Tax Credit

For people who are employed but earn a low to moderate income, the Earned Income Tax Credit will help boost your refund. In 2018, married couples with three or more children who are considered qualifying can receive a maximum of $6,431. As income levels increase, this amount of the tax credit allowed will gradually decrease. This is known as an income phaseout.

Understanding tax rates can be confusing on your own. That’s why residents of Mountain Home, AR, look to The Callen Accounting Group, PLLC when they need a skilled and knowledgeable accountant. With a focus on small business accounting, these professionals can help you with tax management and preparation, as well as essential payroll processing. On the individual level, they can also lend their assistance with estate planning to ensure your assets are taxed at the best possible rates. Call (870) 425-6066 to schedule an appointment or visit the website for more information on services.