The new tax law that applies to the 2018 calendar year has many different provisions. The effect can vary depending on your personal circumstances. If you are elderly and/or retired, you may be wondering about the 2018 tax reform impact on seniors in Massachusetts.
Elderly Tax Deductions
For 2017, the standard deduction was $6,300 and the personal exemption $4,050. There was also a deduction of $1,250 for the blind or elderly. Under the 2018 tax reform law, the personal exemption is eliminated but the standard deduction is increased to $12,000. The blind or elderly tax deduction also remains. These changes are beneficial, overall, since the new standard deduction is higher than the previous combined standard deduction and personal exemption rates.
Deductible Medical Expenses
The elderly tend to be among those hardest hit by rising healthcare costs. Under previous tax law, only medical expenses exceeding 10% of income would be deductible. Thus, for a person earning $30,000 a year, only medical expenses exceeding $3,000 could be deducted. The new tax law reduces the threshold to 7.5%. For that same $30,000 income person, medical expenses above $2,250 may be deducted. This change is a positive change for elderly taxpayers who itemize deductions.
Local Tax Deduction Limits
Another important change in tax law relates to local taxes, including state income taxes and real estate property taxes. Only $10,000 of all local taxes may be deducted. Although most seniors pay little in state income taxes, the combination of that and property taxes may exceed the 10k threshold. This is therefore a negative change for seniors in Massachusetts.
More on the 2018 Tax Reform Impact on Seniors in Massachusetts
This summarizes some of the 2018 tax reform impact on seniors in Massachusetts. Depending on your personal circumstances, other 2018 tax law changes may affect you negatively or positively. Consult with your accountant for information on what you can expect, and more importantly, how you may be able to reduce your income tax liability. Don’t forget to also look into necessary changes to your estate plan. Contact us today for an estate plan review.