12.21.2017

Highlights of the new tax reform law

Changes for Individuals:
  • Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37% — through 2025
  • 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) — through 2025 
  • Elimination of personal exemptions — through 2025
  • Doubling of the child tax credit to $2,000 and other modifications intended to help more taxpayers benefit from the credit — through 2025
  • 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
  • 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
  • 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) — through 2025
  • Reduction of the mortgage debt limit for the home mortgage interest deduction to $750,000 ($375,000 for separate filers), with certain exceptions — through 2025
  • Elimination of the deduction for interest on home equity debt — through 2025
  • Elimination of the personal casualty and theft loss deduction (with an exception for federally declared disasters) — through 2025
  • Elimination of miscellaneous itemized deductions subject to the 2% floor (such as certain investment expenses, professional fees and unreimbursed employee business expenses) — through 2025
  • Elimination of the AGI-based reduction of certain itemized deductions — through 2025
  • Elimination of the moving expense deduction (with an exception for members of the military in certain circumstances) — through 2025
  • 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
  • AMT exemption increase, to $109,400 for joint filers, $70,300 for singles and heads of households, and $54,700 for separate filers — through 2025
  • Doubling of the gift and estate tax exemptions, to $10 million (expected to be $11.2 million for 2018 with inflation indexing) — through 2025
The source of the above is a non-copyrighted email from Peterson Whitaker & Bjork, LLC  

How the tax cuts and jobs act could affect these 5 households

Excerpt: A married couple with $100,000 in AGI, no children, $7,000 in annual mortgage interest, $4,000 in charitable contributions, and $3,000 in other itemized deductions.

Now, let's look at a slightly more complex tax situation. Under current tax law, this couple would have $14,000 in itemizable deductions, which is better than the $13,000 standard deduction to which they would be entitled. They would also get personal exemptions of $4,150 each. This would reduce their taxable income to $77,700. Based on the current tax brackets, the couple would pay $10,676 for the year. With the new tax plan, the higher standard deduction of $24,000 would make it no longer worth itemizing, and would give this couple a taxable income of $76,000. The new tax brackets would result in taxable income of $8,739, a $1,919 savings.
What's Your New Bracket Under the GOP Tax Bill? Find Out Here

Excerpt [note: click through for all brackets / shown below: For married couples filing jointly]:

[The] tax bill, while it keeps the existing seven tax brackets, changes the rates and income levels people will have to pay, maintaining the baseline 10% as the lowest level, but cutting the high end from 39.6% to 37%.


Comment: We are not exactly like the married couple with no children. We are retired empty-nesters. What I am doing to prepare for the 2018 tax year:


  • Paying off the HELOC. The interest will no longer be deductible (see bullet point 9 above)
  • Prepaying next year's property tax. See Forbes article
  • Opening a DAF
Re below: some would say "levels the playing field" with renters










Comment below: Another take on how impacts various tax situations. None of the below match mine:







Posted by Jim Peet at 12/21/2017 02:19:00 PM

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