Mississippi Money: Tax Changes for Families
The sound of W-2s and 1099s in the mail heralds the arrival of tax preparation season. It is that cherished time of year when we start to worry if we may have made too much instead of too little. Unfortunately, the recent tax bill will not affect what you are paying or getting back this year, but there are a few treats that you can begin to take advantage of this year.
The sound of W-2s and 1099s in the mail heralds the arrival of tax preparation season. It is that cherished time of year when we start to worry if we may have made too much instead of too little. Unfortunately, the recent tax bill will not affect what you are paying or getting back this year, but there are a few treats that you can begin to take advantage of this year.
One of the less obvious benefits will be a change to section 529 College Savings Plans. Each state operates their own plan that allows families to put aside money for college expenses, investing it and letting it grow tax-free. In Mississippi, contributions up to $10,000 per individual are tax deductible. Now, these accounts can be used for private school tuition (if the State allows). While the benefit of investing over time still makes these best for future college expenses, if your child is already in private school, it is advantageous to open up an account just to pass the tuition through to get a tax break.
The IRS promises that new withholding tables are coming by February – giving everyone a few more dollars in their pockets just in time for Valentines Day (or President’s day – if that is what you celebrate). In general, individual taxpayers making over $20,000 will have a reduced rate. On top of the lower rate, a higher standard deduction will be helpful to most people. Think of that as coming off at your top rate when you do your taxes in 2019!
Families should benefit from the expanded Child Tax Credit. Previously, families have gotten an exemption of around $4,000 for each child (and each parent when Married Filing Jointly) plus a $1,000 Child Tax Credit. Now, the tax credit is $2,000 and is available to higher income households too.
There aren’t any big changes that directly affect your investments, but some income limits to participate in personal IRAs have been raised. These limits increase every so often to keep up with inflation.
Much of the recent tax bill focused on corporate taxes, and if you are a small business owner, you should definitely talk to your CPA about how to take advantage of new provisions for pass-through corporations. For the rest of us, however, there are a few bits and pieces that may save us a few dollars next year. Now go cozy up in your favorite chair with the 1040 Instructions and dream of a better day!
