Tax Code Changes For Individuals

Welcome!

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.

Standard Deduction

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.

 Itemized Deductions

• 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losses, charitable contributions and other deductions not subject to the 2% floor, all other itemized deductions are repealed. The overall limitation on itemized deductions for upper-income individuals is also repealed.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

• Total amount 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.

Medical Expenses

• 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.

Charitable Contributions

• Taxpayers who are able to itemize deductions can include charitable contributions. The current limitation of 50% of income is increased to 60%.

Mortgage Interest

• 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, 2017 is grandfathered.
• The interest on home equity loans will no longer be deductible.

Casualty Losses

• Deductions for unexpected losses to personal property are no longer deductible unless covered by specific federal disaster declarations.

Wagering Losses

• 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.

Alimony

• 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.

IRA Re-characterizations

• 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 ratably phases out for joint filers with income above $315,000.

 Estate Exemption

• 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).