What you need to know about the new tax law

FILE - In this photo March 22, 2013, file photo, the exterior of the Internal Revenue Service (IRS) building in Washington. There’s plenty that won’t get done if thousands of federal employees are barred from working until dysfunctional Washington agrees on a plan to restore funding. (AP Photo/Susan Walsh, File)

INDIANAPOLIS (WISH) — Tax experts say the new tax law has led to plenty of changes on how you’ll file taxes.

Many of the changes go into effect for your 2018 taxes, the ones you file in 2019. But we’ve rounded up what you need to know now.

How will the tax law changes affect you?

Will filing your taxes be easier under the new law?

Will the new tax law save your family money? It can in the right circumstance.

Changes to 529 education savings plans mean you could save more for school, tax-free. But it’s not for everyone.

Changes to what you can deduct

Changes to alimony deductions could mean uglier divorces and longer negotiations.

Some business tax rates were slashed for 2018 filing.

Create you own tax savings.

Will filing be easier?
Will filing be easier?
How are families impacted?
How are families impacted?
Will college planning change?
Will college planning change?
Changes to what you can deduct
Changes to what you can deduct
Changes to divorce and alimony
Changes to divorce and alimony
Changes to business tax laws
Changes to business tax laws
Creating your own tax savings
Creating your own tax savings

Changes to tax brackets

The one you may notice first: The tax brackets are changing.

Here’s the change in savings for married couples:

  • $18,000 taxable income: $0 in savings
  • $60,000 taxable income: $1,800 in savings
  • $100,000 taxable income: $3,000 in savings
  • $200,000 taxable income: $8,000 in savings
  • $350,000 taxable income: $3,500 in savings
  • $450,000 taxable income: $0 in savings
  • $1,000,000 taxable income: $26,000 in savings

Doubling of standard deduction

That means fewer people will need to itemize every single item they want deducted from their income.

When they file their 2018 taxes, a couple can take $24,000 off their income, instead of $12,000. An individual, can deduct $12,000, an increase from $6,000.

“A lot of taxpayers won’t have to itemize and take that time and have to track all that information,” said Winters.

At the same time, personal exemptions are pretty much gone. The $4,000 you used to deduct for every member of your household is no more.

But do those changes mean filing will be simpler? A tax expert Eric Feldman spoke to said most Hoosiers won’t use the two-page 10-40 form; they’ll file the same way they have in the past.

The child tax credit

While the standard deduction has doubled, the personal exemption of $4,000 is gone.

Enter the child tax credit, which is $2,000 per child under the new law, compared to $1,000 per child under the old law.

Chad Halstead, a partner at Katz, Sapper & Miller, a CPA and tax firm, said whether families save money under the new law — and if so how much — will depend on the combination of standard deduction, lower tax rates and child tax credits.

Saving for college

If you end up getting a tax break from changes in the law, you’ll have to decide what to do with the extra cash.

Bill Wozniak, from the nonprofit INvestEd, which helps thousands of students prepare financially for college in Indiana, says a college fund is one way to go.

Investing in a 529 plan lets you save money, tax-free, for education. Previously, the money could only be used for college expenses, but under the new tax law, it can fund private elementary and high school costs.

Choosing what you deduct from federal taxes

If you itemized your taxes, you used to be able to deduct pretty much an unlimited amount off. You could pick two of the three: property, income and sales tax. It would lower your taxable income on your federal taxes.

But starting with your 2018 taxes, you will only be allowed to deduct up to $10,000. Even though the average Hoosier household will be below that threshold, some will not. Halstead says there’s really no way to offset it.

An uglier divorce

Divorce settlements in Indiana could get more difficult and more costly after a change in the way alimony payments are deducted.

How it has worked: The spouse paying alimony gets that amount deducted off his or her income. The money is added to the spouse’s tax returns.

Indianapolis divorce attorney Darryn Duchon says that design in the old tax law gave couples an incentive to settle an alimony payment.

An the state with the sixth-highest divorce rate in the country, Indiana could see longer divorce negotiations.

But if you’ve already completed those negotiations, don’t worry. Only agreements made after the end of 2018 are affected.

Slashes to corporate taxes

Next year, there will be significant changes to how businesses large and small file their taxes. The corporate tax rate businesses pay drops from 35 percent to nearly 20 percent.

Some companies nationwide have announced bonuses for their employees, including Indianapolis’s Anthem.

Others have announced investments in the U.S. They can also pay back investors or put the money in the stock market. When President Donald Trump and Vice President Mike Pence came to town, they talked with businesses about what they’d do with lower taxes.

Creating your own tax savings

The reality is, there have always been quick easy steps you can take and it can save you a lot of money. One idea is to set up a 401(k) through your employer. Another way to save for retirement is an Individual Retirement Account, also called an IRA. We have more money saving tips here.