Kohl & Company CPAs
Jan 23, 2018
Tax and employment reduction law: key provisions that affect people
On December 20, Congress completed the approval of the largest federal tax reform law in more than 30 years. Commonly called the "Tax Jobs and Jobs Act" (TCJA), the new law involves substantial changes for individual taxpayers.
The following is a succinct description of some of the most important provisions. Unless otherwise indicated, these changes become effective for fiscal years beginning after December 31, 2017 and before January 1, 2026.
- The fall in individual income tax rates varies from 0 to 4 percentage points to 10%, 12%, 22%, 24%, 32%, 35% and 37%
- About double the standard deduction to $ 24,000 (married couples filing jointly), $ 18,000 (head of household) and $ 12,000 (single and married couples filing separately)
- Elimination of personal exemptions
- Double the tax credit for children to $ 2,000 and other modifications designed to help more taxpayers benefit from the credit
- The elimination of the individual mandate under the Affordable Care Act that requires taxpayers not covered by a health plan that qualifies to pay a penalty - effective for the months beginning after December 31, 2018, and permanent
- Reduction of the adjusted gross income threshold (IGI) for the deduction of medical expenses to 7.5% for regular purposes and AMT - for 2017 and 2018
- New $ 10,000 limit on the deduction for state and local taxes (combined for property taxes and income, $ 5,000 for taxpayers separately)
- Reduction of the mortgage debt limit for the mortgage interest deduction to $ 750,000 ($ 375,000 for separate filers), with certain exceptions
- Elimination of the interest deduction on debt with mortgage guarantee
- Elimination of the deduction for personal loss and for theft (with the exception of disasters declared by the federal government)
- Elimination of miscellaneous itemized deductions subject to the 2% floor (such as certain investment expenses, professional fees and business expenses of unreimbursed employees)
- Elimination of the AGI-based reduction of certain itemized deductions
- Elimination of the deduction for moving expenses (except for members of the armed forces in certain circumstances)
- Expansion of distributions from Section 529 tax-free plans to include those used to pay expenses of qualifying elementary and secondary schools, up to $ 10,000 per student per fiscal year - permanent
- Increase of the AMT exemption, to $ 109,400 for joint filers, $ 70,300 for singles and heads of households, and $ 54,700 for separate filers
- Duplicate tax exemptions on goods and donations, to $ 10 million (it is expected to be $ 11.2 million for 2018 with inflation indexation)
Keep in mind that additional rules and limits apply. In addition, there are many more changes in the TCJA that will affect people. If you have any questions or want to talk about how you might be affected, contact us.