Below, you'll find a summation of the major implications of the Tax Cuts and Jobs Act, insofar as it affects individual taxpayers. Download a .pdf of the changes here.
These changes are effective January 1, 2018, unless noted otherwise.
Tax Rates and Exemptions
- Most common individual tax brackets reduced 3%; from 15% to 12% and 25% to 22%.
- Highest bracket reduced from 39.6% to 37%.
- Personal Exemption of $4,050 per person is eliminated.
|Prior Law||New Law|
|Married filing jointly||$12,700||$24,000|
Child Tax Credit
- The child tax credit will increase to $2,000 per qualifying child and will be refundable up to $1,400, subject to phase-outs.
- Also included is a temporary $500 nonrefundable credit for other qualifying dependents who are not qualifying children.
Section 529 Plans
- Distributions of up to $10,000 per beneficiary can be used for tuition expenses for public, private or religious elementary or secondary school.
- Rollovers from a 529 plan to an ABLE account are allowed without penalty provided the ABLE account is owned by the same designated beneficiary of the 529 plan or a member of the designated beneficiary’s family.
Discharged Student Loan Indebtedness
- Amounts of Student Loan Debt discharged due to death or disability of the student are no longer taxable.
- With the exception of state and local income taxes, mortgage interest, medical expenses, disaster losses, charitable contributions and other deductions not subject to the 2% floor, all other itemized deductions are repealed. The overall limitation on itemized deductions for upper-income individuals is also repealed.
State and Local Taxes
Totalamount of state and local income tax, sales tax, or real property tax deductible is limited to $10,000.
- Foreign property taxes are no longer deductible.
- Beginning in 2019, the threshold for deducting medical expenses as an itemized deduction will be 7.5% of gross income for taxpayers of all ages.
- Taxpayers who are able to itemize deductions can include charitable contributions. The current limitation of 50% of income is increased to 60%.
- The deduction for mortgage interest is capped to interest paid on $750,000 of debt on a first or second home. Interest on up to $1 million of acquisition debt for loans prior to December 15,
- The interest on home equity loans will no longer be deductible.
- Deductions for unexpected losses to personal property are no longer deductible unless covered by specific federal disaster declarations.
- The definition of “losses from wagering transactions” is clarified to include other expenses incurred by the individual in connection with betting and gambling.
Moving Expense Reimbursements
- The moving expense deduction is no longer available except in the case of a member of the Armed Forces of the United States on active duty who moves pursuant to a military order.
- Beginning with new divorces in 2019, alimony payments to an ex-spouse are no longer deductible, and alimony received is not taxable to the recipient.
Affordable Care Act
- The penalty for failing to maintain minimum essential coverage for individuals (individual mandate) is repealed beginning in 2019.
- The existing rule allowing the reversal of a conversion of one’s 401(k) or traditional IRA to a Roth IRA no longer applies.
Pass-through Business Deduction
- Non-corporate taxpayers, including trusts or estates and individuals, who have domestic qualified business income (QBI) from a partnership, S corporation, or sole proprietorship are allowed to deduct 20% of business-related income, subject to certain wage limits and exceptions. The remaining income is subject to normal individual rates.
- The 20% deduction is not allowed for businesses offering certain personal services, such as CPAs, lawyers, physicians, consultants, etc.
- The deduction
ratablyphases out for joint filers with income above $315,000.
- The total value of property eligible to be transferred tax-free from an estate to an individual has increased to $10 million for single filers ($20 million for married filing jointly status).