Tax Law Highlights & Changes

There are many changes, but these are some that will apply to the majority of our clients…

  • Income tax brackets for individual taxpayers are 10%, 12%, 22%, 24%, 32%, and 37%. Old law the brackets were 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.
  • Standard deductions have almost doubled. 2018 it is $24,000 for married. Last year was $12,700.
  • Personal exemptions are gone for 2018-2025.
  • Itemized deductions:
  • Medical expense “haircut” has been reduced from 10% to 7.5%.
  • State and local tax deductions on state and local tax is capped at $10,000.
  • Casualty losses are no longer deductible unless a federal disaster is declared in that area.
  • Miscellaneous deductions exceeding 2% of AGI are no longer deductible.
  • Capital gains and qualified dividends mostly no change.
  • Affordable Care Act requiring adults and children to have minimum essential health coverage has been repealed.
  • Alternative Minimum Tax thresholds were increased. Married is $109,400 and single filers are $70,300. The phaseout levels are now $1m for married filers and $500k for single filers. This is a “good thing”.
  • Child Tax Credit has increased to $2,000 with a new adjusted gross income threshold of $400,000 for married and $200,000 for all other filers.
  • Alimony – Beginning January 1, 2019, alimony will not be deductible or taxable to both parties.
  • Home Equity loans are no longer deductible after December 31, 2017. No grandfathering available.
  • Home mortgage loans are capped at $750,000 (for loans made after December 15, 2017). Older loans still have the $1,000,000 cap (grandfathered in).
  • Child and Dependent care credit will continue. A new credit of up to $500 for caring for a non-child dependent.
  • Education Credits & Deductions – The new law largely, but not completely, left education deductions and credits unchanged.
  • Gift Tax – annual gift tax exclusion is $15,000 and $30,000 for a married couple, in 2018.

Content in this material is for general information only and not intended to provide specific tax advice or recommendations for any individual.