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Late last year, Congress passed a sweeping overhaul of the tax system, with provisions that will affect almost every taxpayer. Now that you’ve got your 2017 tax return preparation out of the way, it’s time to start getting your finances in order for next year. Below are a few ways the tax cuts and jobs act might impact you.

3 Tax Changes You Should Know About

1. Lower Tax Rates

The new tax legislation features lower tax rates for almost all taxpayers, especially business owners and investors. Most individuals and families will see their tax withholdings drop by at least a few percentage points, while the corporate rate will drop from 35% to just 21%. Many businesses organized as pass-through entities will be entitled to an automatic 20% deduction on income, although some restrictions do apply.

tax return preparation2. Eliminated Deductions

Unfortunately for many taxpayers, the bill balances these rate reductions by eliminating or reducing a wide range of deductions. Deductions for state and local taxes are now capped at $10,000, and other things like alimony are no longer deductible. Speaking with a tax return preparation professional now will eliminate unpleasant surprises when it’s time to file next year.

3. Changes to Net Operating Loss Deductions

Under the old rules, if your business had a net operating loss, you could use that to offset income in the previous two years or up to 20 years in the future. This provision allowed business owners to use losses to minimize tax exposure in particularly good years. The new tax law limits this offset to 80% of your business income, and only agricultural companies can do so retroactively.


 

Income tax return preparation can be confusing, especially with the dramatic changes to the code. Whether you’re an individual taxpayer or you own a business, the professionals at Burch & Associates, Inc. in Lincoln, NE, have the expertise to explain the new law and reduce your tax exposure as much as possible. Visit their website or call (402) 483-4791 to make an appointment, and follow their Facebook for more tax return preparation tips and advice.

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