Congress has passed the first major tax legislation, the Tax Cuts and Jobs Act of 2017, in more than three decades. It is expected to be signed by the President shortly. The following is a summary of some of the key provisions of the bill.
· For individuals, there are now seven federal tax brackets, and the range is 10% to a new top rate of 37% (reduced from 39.6%).
· The new standard deduction will be $12,000 for single filers and $24,000 for married couples filing jointly.
· Personal exemptions are eliminated.
· Elimination of any entertainment business deduction, including expenses related to the purchase of sporting event tickets.
· A cap on deductions for state income and local property taxes to a combined $10,000.
· Charitable deductions and student loan interest deductions remain.
· All miscellaneous itemized deductions have been eliminated.
· The AMT remains, but its exemption is widened.
· The Child Tax Credit is expanded from $1,000 per qualifying child to $2,000. Additionally, the income requirements are increased, to $200,000 for individuals and $400,000 for married couples.
· Estate tax exemption amount is doubled to $11.2M for individuals, and $22.4M for couples.
· A new cap on mortgage interest deductibility on the first $750,000 of debt principal with some grandfathering provisions for existing mortgages and homes under contract for sale.
· Medical expense deductions remain, and are expanded to expenses in excess of 7.5% of AGI (from 10%).
· For corporations, there will now be a single 21% permanent tax rate.
· Pass-through entities (LLCs, S Corporations and Sole proprietorships) will be allowed to deduct 20% of their profit in 2018, subject to certain service industry and income limitations.
The plan is expected to result in a reduction of taxes for most individual households. The business provisions are permanent, but many of the tax breaks for individuals are set to expire in future years.
Let's chat about how the changes impact your personal situation.