An Abbreviated Summary and How It Affects You
Well it was a day-to-day roller coaster ride, but the Republicans finally cobbled together the Tax Cuts and Jobs Act that passed muster with both houses of Congress, plus earned President Trump’s signature on December 22, 2017.
Quick Peek at the New Tax Act
Here’s the Reader’s Digest version, followed by a summary of provisions that may directly affect your taxes and your strategies to maximize your benefits under the new law during 2018 and beyond.
Note: This summary is an abbreviation of the plan details. You are urged to meet with your tax advisor for the specifics as it pertains to your unique circumstances.
- Corporate tax rate cut from 35 percent to 21 percent (through 2025)
- Top individual tax rate drops to 37 percent
- Individual tax rates cut in all income tax brackets
- Standard deduction is doubled
- Personal exemptions are eliminated
Who Must File Form 1099?
Individual Income Taxes
The Act retains the seven income tax brackets but lowers tax rates which will be reflected in employees’ withholding in February 2018 paychecks.
Here’s what the new tax rates look like compared to the old.
Deductions & Exemptions
- Standard deduction doubled from$6,350 for single filers to $12,000; married and joint filers increased from $12,700 to $24,000.
- Personal exemptions of $4,150 eliminated
- Most itemized deductions eliminated, e.g. alimony & home equity loan interest
- Charitable contributions, retirement savings and student loan interest deductions retained
- Mortgage interest deduction limited to the first $750,000 of the loan
- State and local tax deductions limited to $10,000
- Deduction for medical expenses that are 7.5 percent or more of income
- Obamacare tax on those without health insurance repealed
- Estate tax exemption doubled to $11.2 million for singles and $22.4 million for couples
- Alternative minimum tax exemption increased from $54,300 to $70,300 for singles; from $84,500 to $109,400 for joint filers
Child and Elder Care
- Child tax credit increased to $2,000 from $1,000
- 529 savings plans permitted for tuition at private and religious K-12 schools
- Credit of $500 for each non-child dependent.
Business Taxes
- Corporate tax rate lowered from 35 percent to 21 percent
- Standard deduction for pass-through businesses raised to 20 percent
- Corporate interest expense deductions limited to 30 percent of income
- Deductions for depreciable assets permitted in one year rather than amortizing over several
- Others that mainly pertain to large corporations
Summary
Clearly there is much more to the revised and added provisions to the Tax Cuts and Jobs Act that cannot be included in this brief overview. Click here if you’d like to read the Act in its entirety.
Better yet, give us a call to schedule a time to review the specifics as they may affect your unique situation. Together, we can develop an optimum tax strategy that benefits you and your family.
