THE NEW TAX CUTS AND JOBS ACT

January 23, 2018 Pearson & Co, PC Tax Law 0 comment Like

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Obamacare tax on those without health insurance repealed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.