How the 2017 Tax Act Affects You
Wondering how the new tax act will affect your personal taxes? You could take a quick scan of the 1,100-page document, but I went ahead and did the work for you and pulled out some key provisions that I believe are most important to the average American household. Want more information or have a specific question – call me! I’d be happy to help you sort through this new legislation.
The new tax law provides for the same number of tax brackets, but with lower rates and different income thresholds.
2018 Income Tax Brackets
| Rate | Individuals | Married Filing Jointly |
|---|---|---|
| 10% | Up to $9,525 | Up to $19,050 |
| 12% | $9,526 to $38,700 | $19,051 to $77,400 |
| 22% | 38,701 to $82,500 | $77,401 to $165,000 |
| 24% | $82,501 to $157,500 | $165,001 to $315,000 |
| 32% | $157,501 to $200,000 | $315,001 to $400,000 |
| 35% | $200,001 to $500,000 | $400,001 to $600,000 |
| 37% | over $500,000 | over $600,000 |
By comparison, the old rates were:
Individual Taxpayers
| If Taxable Income is Between | The Tax Due Is |
|---|---|
| 0 - $9,325 | 10% of taxable income |
| $9,326 - $37,950 | $932.50 + 15% of the amount over $9,325 |
| $37,951 - $91,900 | $5,226.25 + 25% of the amount over $37,950 |
| $91,901 - $191,650 | $18,713.75 + 28% of the amount over $91,900 |
| $191,651 - $416,700 | $46,643.75 + 33% of the amount over $191,650 |
| $416,701 - $418,400 | $120,910.25 + 35% of the amount over $416,700 |
| $418,401+ | $121,505.25 + 39.6% of amount over $418,400 |
Tax bracket charts via Forbes.com
The standard deduction is nearly doubled to $24,000 for married filers and $12,000 for single filers.
The additional standard deduction for individuals who are age 65 or older, or blind, is retained.
Personal and dependent exemptions (currently $4,050 per person) are eliminated.
The deduction for state and local taxes is significantly changed. This deduction will be capped at $10,000 for the sum of state and local property taxes and income taxes (or sales tax in lieu of income tax). Property taxes paid in carrying on a trade or business will not be subject to this $10,000 cap.
Mortgage interest deduction limit on qualified acquisition debt is reduced from $1,000,000 to $750,000. This means interest is deductible on loan balances up to $750,000 used to buy, build, or improve your primary home or one second home. This reduction applies only to debt incurred on or after December 15, 2017.
Mortgage interest deduction is eliminated for interest paid on home equity debt. This is debt used for something other than to buy, build, or improve your home.
Deductions for investment expenses, tax prep fees, and unreimbursed employee expenses are eliminated.
Medical expenses exceeding 7.5% of your adjusted gross income (AGI) are deductible (down from 10%). This reduced limit applies only for 2017 and 2018.
The phase-out of itemized deductions for higher-income taxpayers is eliminated, meaning higher income tax payers will still be able to take those deductions.
The child credit increases from $1,000 to $2000. The income level at which the credit begins to phase out also increases allowing more taxpayers to benefit.
Alimony payments for divorce agreements entered into and/or modified after December 31, 2018 will no longer be deductible by the payer and will not be considered income to the recipient.
The Alternative Minimum Tax exemption is increased allowing more taxpayers to escape AMT.