NEW ORLEANS, LA (WVUE) - In a sweeping tax reform plan passed by Congress two weeks ago, Americans will see big savings in federal taxes in the new year, but state taxes, are going up.
"Their state tax increase will be about $230 for state taxes, for those earning $70,000 and are married filing joint," said New Orleans CPA Kemberly Washington.
That's good news for the Louisiana treasury, which is facing a billion dollar shortfall, when 20% of the state sales tax expires this year.
Though state taxes are going up, federal tax savings are far higher. The average $70,000 a year earner, married filing jointly will still realize a nearly $1100 state and local tax saving.
"If the federal taxes are declining you can't take that as a deduction on your tax return, meaning you can't take the higher deduction on your tax return so you will be paying a little more on state taxes, but it will offset because of the savings you're getting on federal," said Washington.
Small business owners are also getting a 20% tax deduction, which could help some expand their businesses, or plan for their future.
"It could help small business owners put more money into retirement, and pay their taxes, so they may have more money in their pockets, and be able to do a bit more than they could in the past," said Washington.
Under tax reform, Washington says for couples who are seeking a divorce, there are financial benefits to finalizing the divorce this year.
"Those individuals seeking a divorce, as of December 31st 2018 you will no longer be able to take alimony as a deduction on your tax return," said Washington.
Washington says if you get divorced before the end of the year, your alimony payments will be grandfathered, meaning they will be tax deductible for as long as you pay them.
Washington also says the tax reform bill could hurt New Orleanians who get flooded out in the future. Costs associated with flooding will no longer be tax deductible, unless the president declares a federal disaster.