You've probably heard about the income tax overhaul and wondered how it could affect you. With tax season approaching, we sat down with Nikali Luke and Lesley Bergquist at Simplified Tax and Accounting, which has eight locations across mid-Michigan, to review the most common tax topics.

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What changes should parents be looking for as they do their taxes?

Nikali: Claiming a child is probably the biggest change my clients will see when they file their 2018 taxes. The Child Tax Credit has doubled to $2,000 per child under the age of 17. If in the past your income was too high to qualify for this deduction, you might be in for a good surprise, because that limit was increased significantly.

In addition, working parents with children under 13 years old may qualify for the Child and Dependent Care Credit. The IRS allows a credit up to 35 percent of your daycare costs. If you have one child, you can claim up to $3,000 worth of daycare expenses and $6,000 if you have more than one in daycare. Don't forget that day camps during the summer usually qualify for this credit.

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If you're taking college courses or have dependents who are enrolled, what type of tax benefits might be available?

Lesley: The American Opportunity Tax Credit is a credit for the first $2,000 of qualified education expenses and maxes out at $2,500. A portion of the credit is refundable, which is very rare in the tax code.

It's also important to note that if you are claiming the child that is enrolled, you are allowed to take the credit even if you didn't pay the expenses. So if grandparents helped pay for school or if a loan was used, you are still allowed to take the credit this year. There are very specific rules about what is deductible, how many credit hours you need to qualify and income limitations, so make sure you contact one of our tax specialists to find out if you qualify.

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I've been told there are tax deductions if we save for retirement but you mentioned there also are tax credits?

Nikali: There are, if you make a retirement plan contribution, you could qualify for a credit of up to $4,000. That credit ranges from 10 percent all the way up to 50 percent of what you contribute into your retirement plan. If your income is less than approximately $64,000 for married couples or $21,000 for a single person, this credit might work for you.

And it's not too late to get it if you haven't contributed to a retirement plan yet! Even though we are now into 2019, you are still allowed to create and contribute to certain retirement plans. This is one of those few cases where you can consult with your tax professional and make a decision that will impact your 2018 tax return during 2019.

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What type of information can you share with readers who have their own business or rental property?

Lesley: Well, you are used to hearing about depreciation from your CPA. The IRS has expanded bonus appreciation to now cover both new and used business assets — and the deduction is 100 percent of the purchase price instead of the old rate of 50 percent.

Also, starting with the 2018 tax return, a new 20 percent qualified business income deduction will be available to most business owners. So, you might have to only pay taxes on 80 percent of your business or rental profits. There are income limitations, but they are pretty generous, so we are expecting almost all of our clients to qualify for this new deduction.

What are some other highlights of the new tax changes for 2018?

Nikali: For starters, the IRS standard deduction doubled to $12,000 for an individual and $24,000 for married couples. The income tax rates have gone down and the tax brackets are wider, so more of your income will be taxed at a lower rate in 2018.

Meanwhile, many items on Schedule A, commonly known as the "long form," have been changed or eliminated. The state tax deduction has been limited to $10,000, most home equity loan interest is no longer deductible and all miscellaneous itemized deductions have been eliminated. If in the past you have deducted employee business meals or miles, union dues, etc., please know they have been eliminated from the tax code.

It sounds like the changes might be positive for many people. Is there any other advice people really should keep in mind?

Lesley: We have noticed that the amount of taxes withheld from our clients' paychecks has gone down, sometimes dramatically, so we suggest having your taxes prepared sooner rather than later so you have time to consider any unexpected surprises before the April 15 due date.

The tax code still is fairly complicated, so if you'd like to work with a local company that is committed to mid-Michigan, give one of Simplified Tax's specialists a call at 517-882-2441. They have eight convenient locations.