Your paycheck is about to get bigger, thanks to the Tax Cuts and Jobs Act passed last December. And if you use this opportunity to get your financial act together, this windfall could permanently change your life for the better. The key: Don’t spend all of the additional income.
Here’s how you can use this newfound money to your best advantage.
The new tax law changes the way most people pay income taxes. It doubles the standard deduction, which means millions of people will no longer need to itemize to get the most out of their tax deductions. It also eliminates personal exemption credits, lowers some tax rates and provides a bigger refundable credit to lower- and middle-income families who have children.
The U.S. Treasury estimates that 90 percent of American households will get a tax break as a result. However, higher-income households in high-tax states are likely to pay more in income taxes because the law also limits some itemized deductions, such as those for home mortgage interest and state income and property taxes.
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