Jan 11, 2018 3 min read

There is a lot of misinformation circulating about the new tax law. Any changes apply only to 2018 returns. This means the return you file by April 15 of this year will be under the old rules.

Most people will pay less tax because of the changes. There are still seven tax brackets. In the old system, tax brackets went from 10 percent to 39.6 percent. The new law has brackets that range from 10 percent to 37 percent. The range of incomes in each bracket has been increased. This means you can earn more before moving into a higher tax bracket.

The standard deduction increased from $6,350 for an individual to $12,000. For a couple filing jointly, the standard deduction increased from $12,700 to $24,000. The personal exemption of $4,050 will be eliminated.

The deduction for state and local taxes will still be available, but with a cap of $10,000. This is not as important in Pennsylvania as it is in some higher tax states. The deduction will remain the same for medical expenses in 2018 for costs that exceed 7.5 percent. It will increase in 2019. The child deduction credit will double from $1,000 to $2,000 for children under age 17. This will help to increase the income for families with young children.

Changes for individual tax returns are scheduled to expire in 10 years. It was already stated the plan is to make these changes permanent before then. These were the biggest changes in 30 years. The hope is they will increase the growth in the economy and stimulate job and wage growth.

There were no major changes to retirement or investment accounts. The alternative minimum tax still exists, but has been changed to not affect as many middle income taxpayers. Its original intent was to make high income people pay some taxes from their tax free investments.

It is still important to be proactive with your tax planning. These strategies will be different depending on if you will need to spend your qualified retirement account or will be passing them on to your family or charity. Most people do not consider taxes enough when making financial decisions. Because of this, they end up paying more than necessary. Remember, it’s not how much you earn that important, it’s how much you get to keep.

Gary Boatman is a Monessen-based certified financial planner. He is the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

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