6 Tax Reform Changes Commonly Affecting Individuals
The Tax Cuts and Jobs Act (TCJA) was enacted in December 2017 and affects all taxpayers.
The below is for general informational purposes and we encourage you to reach out to us directly to discuss how specific changes may impact your unique situation.
Six tax reform changes that are commonly affecting individuals:
- Tax rates lowered. Starting in 2018, there are seven income tax brackets, ranging from 10 percent to 37 percent.
- Standard deduction nearly doubled over last year. For 2018, the basic standard deduction is $12,000 for singles, $18,000 for heads of household and $24,000 for married couples filing a joint tax return. Higher amounts apply to people who are blind or filers who are at least age 65. The increased standard deduction, coupled with other changes, means that more than half of those who itemized their deductions – for mortgage interest, charitable contributions and state and local taxes – in tax year 2017 may instead take the higher standard deduction in 2018, according to IRS projections.
- Various deductions limited or discontinued. For example, the state and local tax deduction is limited to $10,000, $5,000 if married and filing a separate return, and new limits apply to mortgage interest. In addition, the miscellaneous itemized deduction for job-related costs and certain other expenses is not available.
- Child Tax Credit doubled, and more people now qualify. The maximum credit is now $2,000 for each qualifying child under age 17. In addition, the income limit for getting the full credit is $400,000 for joint filers and $200,000 for other taxpayers.
- New credit for other dependents. A $500 credit is available for each dependent who does not qualify for the Child Tax Credit. This includes older children and qualifying relatives, such as a parent.
- Personal and dependency exemptions suspended. This means that an exemption can no longer be claimed for a tax filer, spouse and dependents.