This year, there appears to be a lot of confusion surrounding individual tax payments and 2018 tax reform. This isn’t uncommon. Every year that a new president takes office, there are major changes to the tax code. With the Tax Cuts and Jobs Act, that confusion seems to be compounded.
Clients have shown up without information on their home equity loans because they thought that deductions had been eliminated by the new bill. They haven’t, and the majority of 2018 tax reform rules won’t go into effect until next year.
There are several other misconceptions concerning the changes that will take effect when you file again in 2019. Below, Sodowsky Law Firm explains some of the most common misconceptions about 2018 tax reform.
Myth 1: Interest on Your Home Equity Loan Is No Longer Deductible
Firstly, there were no changes here for your 2017 filing. However, when you file in 2018 there is at least one key change that you should bear in mind. Interest on your home equity loan is still deductible if (and only if) you use it for your home. Those who use their home equity loan toward the purchase of a new car or to pay off other debts would not be able to claim that on their taxes come 2018. Those who use it toward the revitalization of their house, however, still can.
Myth 2: There Is No Hack to Getting a Timeline for Your Refund
Some clients are under the impression that if they got a transcript from the IRS this would not only give them a timeline for when their refund would be paid out, but it would also speed up the process. Sadly, neither of these things are true. On the other hand, the IRS does provide folks with a way to check the progress of their refund right on the IRS website. They also have a handy IRS app that you can download for your phone or mobile device.
Myth 3: You Are No Longer Allowed to Claim Any Deductions
2018 tax reform has not eliminated deductions entirely. People with this misconception will end up handing Uncle Sam an unnecessary gift. The 2018 reforms capped deductions at $10,000. When you filed your 2017 taxes that limit was not in place.
On the other hand, standard deductions will rise nearly 200% under the 2018 reforms. But that will not take effect until you file in 2019.
Myth 4: The Repeal of the Obamacare Individual Mandate Means I Don’t Have to Prove Insurance
You still had to prove that you were insured when you filed taxes this spring. While 2018 tax reform effectively repealed the individual mandate, that won’t go into effect until you file again in 2020 for 2019. Both this year and next year you’ll need to show that you have health coverage or qualify for an exemption.
There is one noteworthy change that will take effect in 2019. Individuals will no longer be required to purchase health insurance from qualified ACA exchanges. Prior to the Tax Cuts and Jobs Act, folks were more or less forced to purchase insurance from the exchange or risk a penalty.
Myth 5: All Refunds Will Be Delayed
Due to widespread concerns about fraud, many believe that tax refunds will be uniformly delayed this year. The IRS is assuring us all that this is not the case. While fraudulent returns remain a serious problem, the IRS maintains that it will only take about 21 days to process the majority of filings.
Early filers still have the advantage here. They may have seen their returns come in as early as the first days of March. The IRS also states that only 1 out of 10 refunds will raise their eyebrows, and those that don’t will be processed in the standard 3 weeks.
All the uncertainty surrounding 2018 tax reform, in other words, isn’t nearly as bad you think!
Need Help Understanding How 2018 Tax Reform Will Affect You?
The Sodowsky Law Firm of Fairfax, Virginia is here to help. Give us a call at (703) 457-1563 and we’ll address any concerns that you might have or ensure an outcome you can live with if the IRS has you in their crosshairs.