Major tax reform hasn't occurred since the Reagan era, but that streak ended Dec. 22 when the Trump administration's Tax Cuts and Jobs Act of 2017 was signed into law.
Thanks to corporate tax cuts included in the bill, American businesses have seen billions of dollars worth of savings already. The result for the average taxpayer is less certain and depends on many factors.
"Some will save some, some will lose some," said Steven H. Osiason, a CPA in Tampa, Fla., and a member of the Florida Institute of CPAs.
Nevertheless, most changes under the new law went into effect Jan. 1, which means workers should consider at least reviewing their tax strategy for 2018 now - or run the risk of underpaying or overpaying their taxes this year.
While tax reform won't change your 2017 filing much (save for an exemption for major unreimbursed medical expenses), 2018 is a much different story. There are three major differences will affect the majority of Americans when they file their taxes for 2018:
The standard deduction has doubled from $6,350 to $12,000 for single filers and from $12,700 to $24,000 for married couples filing jointly. Because the standard deduction is so much higher, it may make less sense for many taxpayers to itemize their deductions for 2018.
Meanwhile, the personal exemption, each $4,050 for you, your spouse and any dependents, has been removed. However, Amy Wang, senior manager for tax policy and advocacy for the American Institute of CPAs, says the new or expanded provisions will counteract the loss of the personal exemption and other cuts.
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The state and local tax deduction (aka the "SALT" deduction) was not eliminated entirely, meaning you can still deduct your real estate, sales and city and state income taxes if you itemize. However, the bill places a $10,000 limitation on that deduction. Previously, the amount was unlimited.
Check out this quick explainer from MagnifyMoney for a comprehensive look at the tax changes.
Whether you stand to benefit or not from the new bill, Wang says it will simplify taxes for a lot of people.
Even if you haven't turned in your 2017 taxes, it's smart to be aware from now of major changes and plan for next year's tax season.
What to expect from your 2017 taxes
More pay in your pocket. A change in tax brackets, plus the doubling of the standard deduction, could boost your take-home pay this year.
Unless you are a single filer who makes less than $9,525, married filing jointly with an income of less than $19,050 or head of household making less than $13,600, you'll see a drop in the taxable portion of your income.
What that means now is that you should be seeing a slightly larger paycheck, or you might get a larger return next year, says Wang.
Wang says the IRS required all employers to make changes to their employees tax withholdings by February 2018. While you should be seeing changes, you should compare your most recent pay stub with the IRS withholding calculator.
"It's important because you want to make sure that you are paying enough taxes," said Wang.
Tax deductions: Some drop off the list. While the increase of the standard deduction will result in more individuals and couples opting out of itemizing, those who are itemizing will face some serious cuts in what's available to deduct.
"Those hit hardest are people in high income-tax states because you're limited to a total deduction on itemizing of $10,000," said Osiason. "That includes the sum of all your real estate taxes, sales tax and state and city income tax."
In addition to a new cap on the previously unlimited SALT deductions, the amount you can deduct from your mortgage interest is lowered as well. You can now only deduct the interest on a mortgage that is $750,000 or or less, which is down from $1 million. On the bright side, the former $1 million cap continues to apply to homeowners who took out their mortgages on or before Dec. 15, 2017, as well as mortgage refis completed on or before Dec. 15, 2017, as long as the new mortgage amount does not exceed the amount of debt being refinanced.
Tax reform completely cuts several other deductions, including moving expense deductions (with the exception of active military personnel moving due to military order), tax prep deductions and disaster deductions (unless the damage was due to a federally declared disaster).
Also, the requirements for out-of-pocket medical expense deductions changed. Now, you can only deduct out-of-pocket medical expenses that are 7.5% higher than your adjusted gross income. Previously, that threshold was set at 10%.
Again, the loss of these deductions might sting but not too badly, given the fact that the GOP decided to raise the standard deduction.
Tax credits and more: Child care, others enhanced. One of the most significant changes, and one that helps balance out the loss of the personal exemption for many people, is the doubling of the child tax credit. Having never been adjusted for inflation, the credit is now up from $1,000 to $2,000. Additionally, $1,400 of that is refundable, whereas before it was just a deduction.
There is also a new $500 credit if you support a non-child dependent, such as an elderly parent or child over 17.
Funds from 529 accounts that could previously only be used for college tuition can now be used (up to $10,000) for enrollment in K-12 public, private or religious schools.
Wang notes that many of the tax law changes are set to expire in 2025, and are adjusted for inflation.
For example, the estate and gift tax has been doubled, so the basic exclusion amount has been extended from $5 million to $10 million for descendents dying or for gifts made after Dec. 31, 2017 and before Jan. 1, 2026.
Osiason warns that if you're expecting a refund next year, don't expect a quick one.
"The IRS will be behind schedule getting all the forms ready," he said. "It's such a massive change. The IRS has to write the regulations, figure out how to actually apply the rules and then redo so many forms."
MagnifyMoney is a price comparison and financial education website, founded by former bankers who use their knowledge of how the system works to help you save money.