The much-anticipated U.S. tax reform legislation – the “Tax Cuts and Jobs Act” – was signed on December 22nd by President Trump.   

  

How does the tax reform affect you?

EFFECTIVE 1/1/18 - 12/31/25

   

-- New standard deductions

  • $24,000 for married couples filing jointly,

  • $18,000 for head of household,

  • $12,000 for single individuals

    ​

-- Personal exemptions are eliminated

   

-- The child tax credit is $2,000

  • up to $1,400 of the credit is refundable

  • the credit will begin to phase out at an income threshold of $400,000 for married couples filing joint returns ($200,000 for all other taxpayers). This threshold is not adjusted for inflation.

   ​

-- A $500 credit for each non-child dependent

  • the credit is nonrefundable

   ​      

-- $10,000 combined limit to state and local income and property tax deduction

  • In 2018, deductions for State and Local income and property taxes will be capped at a combined total of $10,000.

      ​

All deductions for miscellaneous itemized deductions subject to the 2 percent floor are repealed 

   

This results in the elimination of the deductions for employee business expenses

(including mileage and home office deductions)

as well as tax preparation and attorney fees, among others.

OTHER PROVISIONS
 (for individuals)
   
  • A decrease in the itemized deduction for medical expenses threshold, from 10 percent to 7.5 percent in 2017 and 2018

  • Permanent repeal of the individual mandate to buy health insurance coverage after 2018

  • Elementary and high school expenses are now qualifying expenses for Section 529 plans

  • The alimony expense deduction (and corresponding inclusion in income for the recipient spouse) is repealed for separation instruments executed after Dec. 31, 2018.

The new rules won't affect anyone who divorces or signs a separation agreement before 2019.

  

  • The AMT exemption amount is increased to $109,400 for married taxpayers filing a joint return ($70,300 for single filers)

With a phase out threshold of $1,000,000 for married taxpayers filing a joint return ($500,000 for single filers)

The following credits, deductions, and exclusions were wholly unchanged:

  • Adoption credit

  • Educator expense deduction

  • Education credits (American Opportunity and Lifetime Learning credits)

  • Earned Income Credit

  • Employer provided housing exclusion

  • Exclusion for adoption assistance programs

With over 1,000 pages of H.R. 1, this tax reform is HUGE and there are MANY changes that could affect you, please call our office with questions.