Tax Law: What It Means For Your 2018 Taxes
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How should you prepare for filing 2018 taxes after the new tax law?
With your money briefing, I'm J.R. Whelan at The Wall Street Journal in New York. It won't be long before we're gathering up all of our receipts and tax documents for 2018. So how does the new tax law affect your 2018 taxes? We've got the Journal's tax reporter to break it all down in a moment. First, these money and market stories you should know. Sales of previously owned U.S. homes edged up in November from a month earlier, but registered the largest annual decline in more than seven years. That sends a signal that the sputtering housing market may finish the year on a soft note. Wednesday's data showed that some buyers could be reentering the market, but that conditions are far from robust. Existing home sales rose 1.9 percent in November from October.
Borrowing costs for U.S. consumers have risen unevenly in recent months, driven by expectations that the Federal Reserve will increase interest rates in December, which it did on Wednesday, and uncertainty about the economic outlook. Variable rates on credit card debt averaged 17.6 percent last week. That compares to 17.31 percent in September. Meanwhile, the average cost of a 30-year fixed-rate mortgage fell last week to a three-month low of 4.63%. That's down from mid-November's peak of 4.94%. The difference would have shaved $37 a month off a $200,000 mortgage and $94 a month off a $500,000 mortgage. And when's the last time you had a never-ending pasta bowl at an Olive Garden restaurant? The restaurant chain raised the price by a dollar to $10.99, and that was the first price increase in five years.
That didn't deter hungry customers. Olive Garden's parent company, Darden, reported a 3.5% same-restaurant sales increase at Olive Garden.
What immediate money and market headlines provide context for tax changes?
And by the way, Darden also owns Longhorn Steakhouse, the Capital Grill, and Bahama Breeze Restaurants.
By now you've heard plenty about the new tax law, but it's been a dizzying amount of information about deductions, charitable donations, the child tax breaks. So let's break down how the tax law is going to affect 2018 tax filers. We've got Wall Street Journal tax reporter Laura Saunders with us to break it all down. So Laura, new tax law or not, December is a good time to take stock of your personal finances anyway. But in this case, it's wise to review your paycheck for deductions. What specifically should folks be looking for?
Oh, there are all kinds of things. One important tip is that if you rely on a large tax refund, say, to help pay bills from Christmas or something like that, be sure to check your withholding. Because your withholding, if you have a paycheck with a W-2 form from your employer... Your withholding has changed to put more money week by week into your paycheck based on what's happening with the tax overhaul. And so your refund could be a lot smaller next year. This would be less true for people who have a lot of children under 17 because they're getting a big new break. But you really need to go to the IRS website and use their calculator so that you can avoid a bad surprise.
Yeah, they've published a pretty, very granular, very detailed calendar. But as you point out in your column, people haven't used it all that much.
No, they haven't. We all have a lot to do. You have to have your paycheck in hand and things like that.
But you have a link to it in your column.
Yes, I do.
Okay, so people can then go ahead and see it. Yeah. Another important change for next year is the status of personal exemptions.
Oh, yeah. Those are gone. Congress took – there was an exemption or deduction you got for every member of a household, basically everybody in the family. And they took that away, but they made the standard deduction a whole bunch larger. And so there's some effects of this. But really, the personal exemption is gone.
And one of the more notorious elements of the new tax law is the limit of write-offs for state and local taxes. And you've got a good question in your column, which is whether a married couple filing separately can deduct the taxes twice.
So the new cap on state and local tax deductions is $10,000 per return.
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