Lawrence Zabielski, a Certified Personal Accountant runs his business at 65 Broad Street in Westfield. (Photo by Peter Currier)
WESTFIELD- Tax season is upon us, and some people are expressing concern over how to file and what their returns will look like. This will be the first year in which taxpayers will be filing their taxes under the new tax reform bill passed by Congress in December of 2017. Lawrence Zabielski, a Certified Public Accountant in Westfield, hopes to clear up some of the confusion before the tax season starts kicking into gear.
“This is the most massive change in my 40-year career,” said Zabielski, “some people are going to be affected for the better, and some people are going to be affected for the worse.”
Zabielski wanted to focus primarily on individual taxes rather than corporate taxes. The first point he made regarding the new law is that both tax brackets and tax rates fell, which Zabielski said is one of the good things about this bill. The top individual tax rate has been lowered from 39.6% to 37%. However, that rate doesn’t kick in until a higher income level than before.
Zabielski added that there are many aspects of the law that he considers a negative for individual taxpayers. One such example was the loss of personal exemptions.
“In the past if you had a husband and wife with three kids you had five personal exemptions,” said Zabielski, “that no longer exists, and I think that is going to hurt people.”
He noted that the standard deduction for those who opt to not itemize their deductions has risen dramatically. He said that for a married couple filing jointly, the standard deduction is $24,000 and $12,000 for a single person.
“For persons 65 and older, that standard deduction will increase by $1,300 per person if they are married,” he said, “and it is $1,600 if they are unmarried.”
One of the biggest problems people may run into, according to Zabielski, is the area of the taxes that they previously deducted. There are three numbers taxpayers should focus on for this case: the state income tax, the car excise tax, and the real estate tax. These three taxes used to be able to be deducted individually. Now, according to Zabielski, the total deductions for all three items combined cannot exceed $10,000.
“That is going to hurt a lot of people,” said Zabielski, “if you take the average homeowner in Westfield a lot of them are paying more than $6,000 in real estate taxes.”
He did clarify that if one owns rental property, they can deduct 100 percent of the real estate tax from those properties.
For medical deductions, the policy used to be that one could only deduct their medical expenses if they exceeded 10 percent of their gross income. Under the new bill, that number is lowered to 7.5 percent. If one’s gross income is $50,000, they can now deduct their medical expenses if they exceed $3,750 rather than $5,000 like it was before.
“It’s very difficult for me when somebody comes in here and asks how I think they’re going to make out,” said Zabielski, “until I do it, I have no idea because there are so many things that are changing.”
He noted that in his four-decade long career, this year has made him spend the most time researching the new changes.
Zabielski also spoke at length about the child tax credit. He said that if one has a child that will be under the age of 17 by December 31st of the year in question, the parent is eligible for a tax credit of up to $2,000 per child.
Zabielski emphasized that the new law and policies are even confusing for people like him who embroil themselves in tax law for a living.
“In my opinion I think they passed this law way too fast without thinking about the ramifications,” he said, “but until we get into doing a lot of returns will we see how they make out.”
One of the worst parts of the law, in Zabielski’s opinion, are the effects it may have on charitable donations and non-profits. Due to the limits on what can be deducted, people may not be able to claim a donation to charity on their taxes and will not receive the deduction for it. Of course, this could lead to fewer individuals giving donations to charities or non-profits.
Lawrence added that there may be confusion over lines of credit interest on one’s house. He said that one can only deduct the interest if the funds are used for improving an already existing home.
“Other than that, it is theoretically not deductible,” said Zabielski.
It is important to note that the capital gains rates were not changed from the previous tax policy.
Another important area of the bill is the education deduction for college students. For the first four years of college, a student’s parent can receive a tax credit of up to $2,500 per student. The student should receive a 10-98T form which will disclose the amount of tuition paid by the student during the year in question. The credit does not apply to room and board charges.
“I tried hard to highlight those major changes,” said Zabielski, “hopefully people can take a great deal out of this and familiarize themselves with the changes.”
