The GOP tax bill all but passed through Congress Tuesday night, with Republican majorities in both houses carrying the tax reform package to President Donald Trump’s desk, where he is expected to sign it into law. But the legislation that breezed through the House and squeezed through the Senate is complex, so it’s hard to know exactly when tax reform will effect taxpayers across the U.S.
Some of the Republican tax bill’s impact will begin at the start of 2018, though other elements won’t take effect until 2019 and beyond. For instance, when you file your 2017 taxes in April, you’ll already be getting some benefits like lower tax withholding, but other perks won’t show until you file your tax return in April 2019.
If you’re trying to get your finances ready to take advantage of the Trump tax plan, here’s what you need to know:
Make your 2018 charitable donations now
If you’re one of the many filers who will benefit by taking the GOP tax bill’s increased standard deductions -- and you previously deducted charitable contributions under the old tax plan -- consider making your 2018 charitable donations before the ball drops on New Year’s Eve. By using the new, bigger standard deductions, you’re agreeing not to itemize your returns, which means it’s not financially beneficial for you to give to charities in 2018. This is a point of contention for nonprofits and opponents of the bill. But there is one way to make sure both you and charities benefit (at least at the moment), and that’s by putting your 2018 contribution on your 2017 taxes instead.
Tax brackets change on January 1
With changes to the tax rates, the GOP tax bill brings tax cuts to almost all of the seven tax brackets beginning in 2018. That means the current rates, from 10% for the lowest bracket to 39.6% for the highest earners, will change and look like this:
Tax withholding changes early in 2018
According to the Internal Revenue Service, new guidance about tax withholding will be issued in January, which means the amount of taxes that come out of your paycheck could change as early as February.