Highlights of 2018 Tax Reform Act - Changes affecting 2018 and beyond
2017 was a challenging tax year for businesses and higher-income taxpayers. The following issues are concerns that may impact you and your tax liability for this year and beyond.
Adjusted Tax Rates:The new law preserves 7 tax brackets
Individual (Married Filing Jointly)
- 10% on income up to $9,525 (19,050)
- 12% over $9,525 to $38,700 ($19,050 to $77,400)
- 22% over 38,700 to $82,500 (over 77,400 to $165,000)
- 24% over $82,500 to $157,500 (over $165,000 to $315,000)
- 32% OVER $157,500 to $200,000 (over $315,000 to $400,000)
- 35% over $200,000 to $500,000 (over $400,000 to $600,000)
- 37% over $500,000 (over $600,000)
Increases standard deduction from $6,350 to $12,000 ($12,700 to $24,000)
Eliminates the $4,050 personal exemption for you, your spouse and each dependent.
By eliminating this exemption the standard deduction has a net benefit of only $1,600 ($3,200).
Keeps deductions for charitable contributions, retirement savings, medical expenses,
school supplies if you are a teacher, state and local income taxes (including property taxes) are capped at $10,000.
Limits the deduction for mortgage interest to the first $750,000 of the loan. Interest on home equity loan is no longer deductible.
These apply to new mortgages only. Current mortgage holders are not affected.
CHILD AND ELDER CARE
Child Tax Credit has doubled to $2,000 for children under 17.
You may now take a $500.00 tax credit for non-child dependents.
Now you can use 529 savings plans for private and religious schools for grades K-12 and expenses of home schooling. Also, beginning January 1, 2018, parents who contribute at least $25.00 per month will be matched up to $200.00 of their contributions. SEE Scholar Share 529 at www.irs.gov.
Electric Vehicle Tax Credit has been extended and is available for 2017 and 2018.
The maximum corporate rate has been lowered from 35% to 21%.
The standard deduction for pass through businesses has been raised to 20% (set to end in 2025).
Businesses (Corporations, LLCs, Partnerships, Exempt organizations and sole proprietors can deduct the cost of depreciable assets (without limitation)in the year of acquisition instead of amortizing them over years. (Structures are excluded). The equipment must be purchased after September 27, 2017 and before January 1, 2023.