Officially known as the Tax Cuts and Jobs Act, 2018 tax reform included many adjustments to tax law and how taxpayers are affected. Find up-to-date information on tax reform and answers to commonly asked questions here.
The purpose of tax deductions is to decrease your taxable income, which then decreases the amount of taxes you need to pay to the federal government. To help you reduce your taxable income, we aggregated a huge list of deductions many people often overlook or aren’t sure how to use them to their advantage.
For tax purposes, your adjusted gross income or AGI is essentially your total or gross income minus eligible deductions. You can use our AGI calculator to estimate your adjusted gross income using the most common income and deductions for US taxpayers.
Your tax bracket shows you the tax rate that you will pay for each portion of your income. For example, if you are a single person, the lowest possible tax rate of 10 percent is applied to the first $9,525 of your income in 2018. The next portion of your income is taxed at the next tax bracket of 12 percent. That continues for each tax bracket up to the top of your taxable income. Find yours with our helpful tax bracket calculator.
Most income is taxable, whether you earn it or are paid as a return on your investment. Also, you generally have to pay tax on income when you sell something for more than your basis (usually the amount you paid for something).
If a type of income is taxable, it doesn't matter if you receive payment in cash, by check or electronic payment, or in the form of goods or services. You still pay tax on it.
Certain types of income are excluded from tax. This generally includes income you or someone else has already paid tax on, or income from special situations, such as combat pay.
Learn more about different types of taxable income here.
Your tax filing status makes a big difference in your tax return when you file.
Many people simply choose the status they believe best fits their personal situation, but in some cases, you may have more than one option. At that point, it’s up to you to pick the status that offers you the most tax advantages. Filing status options are:
Learn everything you need to know about how filing status impacts your tax return and refund here.
Credits differ from deductions and exemptions because credits reduce your tax bill directly. After calculating your total taxes, you can subtract any credits for which you qualify. Some credits address social concerns for taxpayers, like The Child Tax Credit, and others can influence behavior, like education credits that help with the costs of continuing your education.
There are numerous credits available for a wide range of causes, and all reduce your tax liability dollar for dollar. That means a $1,000 tax credit reduces your tax bill by $1,000. Reviewing all the options may be time-consuming, but could also prove to be profitable.
Some major tax credits are:
Learn more about tax credits and how they impact your tax return and tax refund here.
Exemptions are portions of your personal or family income that are ‘exempt’ from taxation. The Internal Revenue Code allows taxpayers to claim exemptions that reduce their taxable income. Both personal and dependent exemptions lower the amount of your taxable income. That ultimately reduces the amount of total tax you owe for the year.
For tax purposes, all dependents receive exemptions, including you and your spouse. To the Internal Revenue Service (IRS), these are the people for whom you are financially responsible. A higher number of exemptions reduces your taxable income. In most cases, dependents must be:
You can reduce your taxable income by multiplying the dollar value of a personal exemption, which is a predetermined amount, by the number of your dependents. For example, in 2017, the personal exemption is $4,050. It’s the same amount for your spouse and each dependent as well. These exemptions are reduced if your adjusted gross income (AGI) exceeds $261,500 as a single filer or 313,800 if you’re married and file a joint return.
Example: Josh and Kristen are married with a combined income of $90,000. They have three children whom they claim as dependents. That means they can claim five exemptions of $4,050 each. That reduces their taxable income by $20,250.
Learn about the top exemptions claimed by families here.
Estimating your 2018 tax refund is easy. Simply answer the questions in each section of the TaxAct Tax Calculator based on your expectations for the entire year. Don’t worry about being exact – just do the best you can. You always have the option to go back and estimate again, especially if your tax situation significantly changes.
In the upper right corner of the screen, you can quickly watch how the information you enter influences your tax outcome as you answer the questions. You can also view your total income, adjustments, deductions and other information in the tax summary.
Let’s say you’ve run the Tax Calculator and ended with a lower tax refund or higher tax bill than what you had hoped. You can try different scenarios to see how you may be able to improve your situation.
For example, see what happens if you increase charitable contributions or plug in energy-saving improvements to your home.
If your income is liable to change, consider estimating your taxes with higher and lower numbers to determine how the varying figures affect the amount of tax you might owe.
Remember the Tax Calculator is a quick tool to help plan your tax year and ensure you’re accounting for the right amount of tax. It’s important to use the calculator whenever your tax situation changes or as you become more confident in your estimated amounts. If your tax situation is more complex, you may need to make adjustments for other factors as well.
The more often you estimate your taxes, the better you can plan ahead and stay in control of your taxes.
As tax laws shift throughout the year, TaxAct’s Tax Calculator is updated to reflect those changes. These updates allow you peace of mind when using the results to help determine what potential adjustments need to be made to receive your best possible tax outcome.
The standard deduction amounts for 2018 are:
For 2018, the Child Tax Credit increases from $1,000 to $2,000 per qualifying child. The maximum income (AGI) to receive the full credit varies depending on filing status as follows:
If your AGI is more than the figures listed above, you still may be eligible to receive a partial credit. The limits at which the Child Tax Credit disappears are as follows:
The IRS issues most refunds in less than 21 calendar days from the day the tax return is processed.
Are you among the many Americans who file your taxes early so you can get your refund sooner? If you claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) and expect to receive a refund, you’ll have to wait until after mid-February to get it.
If you don’t claim the EITC or the ACTC, the IRS says your refund will likely be processed in the typical time frame of 21 days.
Your tax bracket shows you the tax rate that you will pay for each portion of your income. For example, if you are a single person, the lowest possible tax rate of 10 percent is applied to the first $9,525 of your income in 2018. The next portion of your income is taxed at the next tax bracket of 12 percent. That continues for each tax bracket up to the top of your taxable income.
Find your tax bracket for 2018 here.
You can download tax forms from many places, including the IRS website. Many of those sites don’t help you fill out the forms, however. They also don’t offer a maximum refund guarantee, which is available through TaxAct.
Below is a list of the most common IRS tax forms you may need to file your taxes: