Tax Cuts and Jobs Act for 2018

The 2018 tax law that recently passed has a number of differences from both 2017 tax law and the originally-proposed tax plan. Most of these changes sunset after 2025, with some exceptions.

Tax rates and brackets have adjusted, as seen below, with some tax rates going up and some down.

Exemptions have been eliminated, and the standard deduction has increased to $12,000 for single individuals and $24,000 for married couples.

AMT exemptions and phase-outs have increased. Child tax credit has increased to $2,000 for each child (up from $1,000), with a smaller portion being refundable and with a higher phase out at $400,000 for joint filers.

Allowable itemized deductions have changed, with medical expenses being subject to the 7.5% threshold until the end of 2018. State and local taxes are limited to $10,000 per return. Interest payments are only deductible for home mortgages up to $750,000, with no deductibility for home equity lines of credit. Miscellaneous itemized deductions are no longer allowable. Overall, itemized deductions are no longer limited.

The top corporate tax rates have decreased to 21%, and pass-through business income is also limited to 29.6% for some businesses.

Estates are only taxed above $11.2 million for individuals and $22.4 million for couples.

The Affordable Care Act individual mandate penalty has been repealed beginning in 2019.

There are many additional changes to the tax law as of 2018, as well. To understand how the new tax law will affect specific individuals, people should contact their tax advisor. Some aspects of the changes will increase tax and others will decrease tax, depending on an individual’s specific tax situation.