This has been verified and signed into law.
Here is my recap of the tax changes, as they affect you. One on businesses is in the works.
Here are the new tax rates for 2018 to 2025 (not sure if they will be indexed in future years).
Special brackets will apply for certain children with unearned income.
The system for taxing capital gains and qualified dividends did not change under the act, except that the income levels at which the 15% and 20% rates apply were altered (and will be adjusted for inflation after 2018). For 2018, the 15% rate will start at $77,200 for married taxpayers filing jointly, $51,700 for heads of household, and $38,600 for other individuals. The 20% rate will start at $479,000 for married taxpayers filing jointly, $452,400 for heads of household, and $425,800 for other individuals.
Standard deduction: The act increased the standard deduction through 2025 for individual taxpayers to $24,000 for married taxpayers filing jointly, $18,000 for heads of household, and $12,000 for all other individuals. The additional standard deduction for elderly and blind taxpayers was not changed by the act. It was to $6,350 for single or married filing separately, $12,700 for married filing jointly or qualifying widower and $9,350 for head of household.
Personal exemptions: The act repealed all personal exemptions through 2025. The withholding rules will be modified to reflect the fact that individuals can no longer claim personal exemptions. Personal exemptions were scheduled to be $4,050 per exemption (yourself, spouse, child or another qualified dependent).
Child tax credit
The act increased the amount of the child tax credit to $2,000 per qualifying child. The maximum refundable amount of the credit is $1,400. The act also created a new nonrefundable $500 credit for qualifying dependents who are not qualifying children. The threshold at which the credit begins to phase out was increased to $400,000 for married taxpayers filing a joint return and $200,000 for other taxpayers. The credit was $1,000 per child under 17.
The act repealed the overall limitation on itemized deductions, through 2025.
Medical expenses: The act reduced the threshold for deduction of medical expenses to 7.5% of adjusted gross income for 2017 and 2018. (was over 10%)
Mortgage interest: The home mortgage interest deduction was modified to reduce the limit on acquisition indebtedness to $750,000 (was limited to $1 million).
A taxpayer who entered into a binding written contract before Dec. 15, 2017, to close on the purchase of a principal residence before Jan. 1, 2018, and who purchases that residence before April 1, 2018, will be considered to have incurred acquisition indebtedness prior to Dec. 15, 2017, under this provision, meaning that he or she will be allowed the prior-law $1 million limit.
Home-equity loans: The home-equity loan interest deduction was repealed through 2025. (was allowed if under the total $1 million limit with the primary mortgage).
State and local taxes: Under the act, individuals can deduct up to $10,000 ($5,000 for married taxpayers filing separately) in state and local income or property taxes (was unlimited to actual).
Casualty losses: Under the act, taxpayers can take a deduction for casualty losses only if the loss is attributable to a presidentially declared disaster (was allowed for any casualty loss, subject to other limitations).
Charitable contributions: The act increased the income-based percentage limit for charitable contributions of cash to public charities to 60%. It also denies a charitable deduction for payments made for college athletic event seating rights. Prior to this, deductions could only be claimed up to 50% of income, excess contributions were carried forward.
Miscellaneous itemized deductions: All miscellaneous itemized deductions subject to the 2% floor under current law are repealed through 2025 by the act. Mileage, uniforms, union dues, etc. were deductible if over 2% of your adjusted gross income.
Other provisions for individuals
Alimony: For any divorce or separation agreement executed after Dec. 31, 2018, the act provides that alimony and separate maintenance payments are not deductible by the payer spouse. It repealed the provisions that provided that those payments were includible in income by the payee spouse.
Moving expenses: The moving expense deduction is repealed through 2025, except for members of the armed forces on active duty who move pursuant to a military order and incident to a permanent change of station.
Moving expense reimbursements: The act repealed through 2025 the exclusion from gross income and wages for qualified moving expense reimbursements, except in the case of a member of the armed forces on active duty who moves pursuant to a military order.
IRA recharacterizations: The act excludes conversion contributions to Roth IRAs from the rule that allows IRA contributions to one type of IRA to be recharacterized as a contribution to the other type of IRA. This is designed to prevent taxpayers from using recharacterization to unwind a Roth conversion.
Health insurance: This bill removes the penalty charged to those individuals who did not obtain health insurance effective after 2018. Note – this does not stop the marketplace, it is still available – it just removes the penalties.
I’m sure that there will be more information in the weeks to come. If I see anything of a mass appeal, I will be sure to post it. If you have any questions of a personal nature, please call me. 704-583-9090