Dr. Kerry Inger, who specializes in financial accounting and corporate taxation in Auburn University’s Harbert College of Business. She provided the following insight into  tax law changes and the effect on consumers and corporations.

What are the main new tax laws this year?

The Tax Cuts and Jobs Act of 2017 was the most significant tax reform since 1986, so there are many new tax laws! At the individual level the repeal of personal and dependent exemptions and doubling of standard deduction is a significant change that will impact many taxpayers. Changes to the child tax credit, lowering of tax rates and specific changes to certain itemized deductions will also impact many individual taxpayers. One of the most significant changes was the reduction in the corporate tax rate from a top rate of 35 percent to a flat rate of 21 percent. There is also a new deduction for flow-through entities (partnerships, s-corporations, etc.) to alleviate the difference between the corporate and individual rates.

What is the expected impact on individuals and businesses?

Many individuals will no longer claim itemized deductions, simplifying the tax return preparation process. Due to changes in withholding schedules to reflect decreased tax rates, some taxpayers who traditionally received a refund will receive a smaller refund or perhaps owe tax. Going forward, taxpayers can adjust their withholding if they prefer a refund. There is some added complexity on the business side, but most businesses should experience a reduction in taxes paid. The new international tax rules are quite complicated, so companies operating overseas will need to pay particular attention.

How will the higher standard deduction affect taxpayers?

Many individual taxpayers will no longer claim itemized deductions because the standard deduction was doubled and the sum of their itemized deductions will not exceed the standard deduction. In addition, certain itemized deductions are limited or no longer available. For example, the deduction for state and local tax is now capped at $10,000 and employees can no longer deduct unreimbursed job expenses. Taxpayers may want to use a bundling strategy to take advantage of itemized deductions in one year and the standard deduction in another. For example, taxpayers may make charitable contributions every other year to take advantage of the tax benefits that are not available if the standard deduction exceeds itemized deductions in total.

What advice would you give to those who receive a refund (i.e., put it in a savings account, spend it, invest, etc.)?

It depends on the individual’s personal circumstances. Paying off debt, investing and saving for retirement are always good options when you have extra cash!