New tax laws introduced in 2017 are finally taking place this year. As a result, many filers are confused about where they stand, especially when it comes to tax brackets and rates. That’s why they turn to a skilled CPA. They can help you further understand the updates listed below. 

New Tax Brackets

Tax brackets are ranges of income that determine how much tax is applied to a person or married couple. In the simplest terms, the more money you earn during the year, the higher your tax rate will be. Marginal rates complicate the matter somewhat, since each portion of your income will be taxed at a different rate.

Thanks to changes, many taxpayers are looking at lower marginal tax rates, which means less money is deducted from one’s paycheck. As an example, in 2017 a single filer earning between $37,951 and $91,900 was subject to a marginal tax rate of 25%. In 2018, a single filer earning between $38,700 and $82,500 was taxed at a rate of 22%. A CPA can help you determine marginal tax rates.

Dependent Exemptions

In 2018, parents were no longer able to claim the dependent exemption deduction. However, the child tax credit was increased to $2,000, which was accompanied by an increase in the income threshold for parents. In the past, parents earning more than $110,000 were unable to claim the child tax credit. This year, the income limit was raised to $400,000 for married couples, which allows more families to make use of the credit.

Changes to the Standard Deduction

When filing, you can use the standard deduction or itemize your deduction, which is a bit more laborious but can be beneficial if the process increases your deduction. Because new tax laws doubled the standard deduction, many taxpayers are choosing this option to enjoy a lower tax liability without all the extra work. In 2017, single filers were subject to a $6,350 standard deduction. In 2018, the standard deduction rate was increased to $12,000.

If you still find the above information confusing, it’s best to secure experienced tax help from a trusted CPA this year. That’s exactly what Linda M. Shiraiwa CPA, PS Inc. offers clients in Gig Harbor, WA, whether you’re filing an individual return or need help with business taxes. She also offers many other essential accounting services, including payroll and bookkeeping, and can even help her clients understand QuickBooks® accounting software. If you’d like to schedule a consultation, call (253) 858-6030 today. You can also visit their website for more information on tax preparation services.