Tax Cuts and Jobs Act: Key Provisions Affecting Individuals

December 20, 2017 marked the passage of the Tax Cuts and Jobs Act (TCJA) – the largest federal tax reform law in more than 30 years. The new law makes substantial changes for individual taxpayers, some of which are listed below. Unless otherwise noted, the following provisions are effective for tax years beginning after December 31, 2017 and before January 1, 2026.

1. Decrease in individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37%
2. Near doubling of the standard deduction to $24,000 (married couples filing jointly), $18,000 (heads of households), and $12,000 (singles and married couples filing separately)
3. Elimination of personal exemptions
4. Doubling of the child tax credit to $2,000 and other modifications intended to help more taxpayers benefit from the credit
5. Elimination of the individual mandate under the Affordable Care Act requiring taxpayers not covered by a qualifying health plan to pay a penalty — effective for months beginning after December 31, 2018, and permanent
6. Reduction of the adjusted gross income (AGI) threshold for the medical expense deduction to 7.5% for regular and AMT purposes — for 2017 and 2018
7. New $10,000 limit on the deduction for state and local taxes (on a combined basis for property and income taxes; $5,000 for separate filers)
8. Reduction of the mortgage debt limit for the home mortgage interest deduction to $750,000 ($375,000 for separate filers), with certain exceptions
9. Elimination of the deduction for interest on home equity debt
10. Elimination of the personal casualty and theft loss deduction (with an exception for federally declared disasters)
11. Elimination of miscellaneous itemized deductions subject to the 2% floor (such as certain investment expenses, professional fees and unreimbursed employee business expenses)
12. Elimination of the AGI-based reduction of certain itemized deductions
13. Elimination of the moving expense deduction (with an exception for members of the military in certain circumstances)
14. Expansion of tax-free Section 529 plan distributions to include those used to pay qualifying elementary and secondary school expenses, up to $10,000 per student per tax year — permanent
15. AMT exemption increase, to $109,400 for joint filers, $70,300 for singles and heads of households, and $54,700 for separate filers
16. Doubling of the gift and estate tax exemptions, to $10 million (expected to be $11.2 million for 2018 with inflation indexing)

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It’s important to note that this is only a summary of the changes that will impact individuals as part of the new tax bill and that additional rules and limits may apply. If you have questions about the new tax law and future tax planning or would like to discuss how you might be affected, please call us at 949-860-9902 or click here to contact us.

© 2017