Tax reform has been a major topic in the news lately with Congress passing the Tax Cuts and Jobs Act of 2017 shortly before the end of the year. Many families will see their take-home pay raise by thousands of dollars over the course of 2018 and I am glad that Congress has acted to provide tax relief for working families.
There are many different elements of the Tax Cuts and Jobs Act of 2017 that will affect individual income taxes for Missourians. For example, the number of federal income tax brackets will be reduced from seven to four, the standard deduction at the federal level will be increased, personal exemptions will be eliminated, the Child Tax Credit will be increased, the Alternative Minimum Tax will be repealed and several itemized deductions will be reduced or eliminated.
There are two primary ways in which the Tax Cuts and Jobs Act will affect Missourians' income taxes. First, the distinction between standard and itemized deduction matters. The MO-1040 form asks for Federal Adjusted Gross Income and allows individuals to subtract either itemized deductions or standard deductions taken on the federal 1040 form. Secondly, for those who take the standard deduction, the taxable income will decline because the new federal standard deduction has increased from $6,000 to $12,000. This essentially means that the federal tax cut is also a Missouri tax cut.Since a large number of itemized deductions have been capped or eliminated, more people will take the standard deduction rather than itemizing their deductions.
What does all of this mean for you?
For most Missourians, it means their state and federal tax bills will decrease. There are multiple tax calculators online to find out how exactly the new law will impact you and your family. One useful tool for your federal taxes can be found at https://www.nytimes.com/interactive/2017/12/17/upshot/tax-calculator.html. To calculate your state taxes, please visit the Department of Revenue site athttp://dor.mo.gov/calculators/incometax/.
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