The following are eight significant tax changes in the Tax Cuts and Jobs Act of 2017:
1. Personal and Dependency Exemptions
In 2017, the personal exemption was $4,050. In 2018, there will be no personal exemption deduction.
2. Child Tax Credit
The new law increases the amount of credit from $1,000 per child to $2,000 per child.
In 2017, the total child tax credit was $1,000 per child, and the phase-out began at the following amounts:
$110,000 married filing joint
$75,000 single
$75,000 head of household
$55,000 for married filing separately
Starting in 2018, the phase out of the credit begins at $400,000 for married filing joint and $200,000 on all other filing statuses. The maximum refundable credit is $1,400 per child.
3. Standard Deduction
The standard deduction has changed. Please see the table below for the difference between the standard deduction in 2018 and 2017.
|
Standard Deduction |
||
|
|
2018 |
2017 |
|
Married Filing Joint |
$24,000 |
$12,700 |
|
Head of Household |
$18,000 |
$9,350 |
|
Single/Married Filing Separately |
$12,000 |
$6,350 |
4. New Tax Rates
Before the new tax law, the Federal tax rates were the following: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. Please see the chart below for the new tax rates, separated by filing status. Please contact us to help you adjust your tax withholdings pursuant to the new tax rates.
|
Single |
|||
|
2018 |
2017 |
||
|
Tax Rate |
Taxable Income |
Tax Rate |
Taxable income |
|
10% |
$0-$9,525 |
10% |
$0-$9,325 |
|
12% |
$9,526-$38,700 |
15% |
$9,326-$37,950 |
|
22% |
$38,701-$82,500 |
25% |
$37,951-$91,900 |
|
24% |
$82,501-$157,500 |
28% |
$91,901-$191,650 |
|
32% |
$157,501-$200,000 |
33% |
$191,651-$416,700 |
|
35% |
$200,001-$500,000 |
35% |
$416,701 -$418,400 |
|
37% |
$500,001 and Over |
39.60% |
$418,401 and Over |
|
Married Filing Joint |
|||
|
2018 |
2017 |
||
|
Tax Rate |
Taxable Income |
Tax Rate |
Taxable income |
|
10% |
$0 -$19,050 |
10% |
$0-$18,650 |
|
12% |
$19,051-$77,400 |
15% |
$18,651-$75,900 |
|
22% |
$77,401-$165,000 |
25% |
$75,901-$153,100 |
|
24% |
$165,001-$315,000 |
28% |
$153,101-$233,350 |
|
32% |
$315,001-$400,000 |
33% |
$233,351-$416,700 |
|
35% |
$400,001-$600,000 |
35% |
$416,701-$470,700 |
|
37% |
$600,001 and Over |
39.60% |
$470,701 and Over |
|
Married Filing Separately |
|||
|
2018 |
2017 |
||
|
Tax Rate |
Taxable Income |
Tax Rate |
Taxable income |
|
10% |
$0-$9,525 |
10% |
$0-$9,325 |
|
12% |
$9,526-$38,700 |
15% |
$9,326-$37,950 |
|
22% |
$38,701-$82,500 |
25% |
$37,951-$76,550 |
|
24% |
$82,501-$157,500 |
28% |
$76,551-$116,675 |
|
32% |
$157,501-$200,000 |
33% |
$116,676-$208,350 |
|
35% |
$200,001-$300,000 |
35% |
$208,351-$235,350 |
|
37% |
$300,001 and Over |
39.60% |
$235,351 and Over |
|
Head of Household |
|||
|
2018 |
2017 |
||
|
Tax Rate |
Taxable Income |
Tax Rate |
Taxable income |
|
10% |
$0-$13,600 |
10% |
$0-$13,350 |
|
12% |
$13,601-$51,800 |
15% |
$13,351-$50,800 |
|
22% |
$51,801-$82,500 |
25% |
$50,801-$131,200 |
|
24% |
$82,501-$157,500 |
28% |
$131,201-$212,500 |
|
32% |
$157,501-$200,000 |
33% |
$212,501-$416,700 |
|
35% |
$200,001-$500,000 |
35% |
$416,701-$444,550 |
|
37% |
$500,001 and Over |
39.60% |
$444,551 and Over |
5. Interest on Home Equity Line
Before 2018, married taxpayers could deduct interest on $100,000 of home equity indebtedness, and single tax payers could deduct interest on $50,000 of home equity indebtedness. Under the new tax law, interest on home equity indebtedness is not deductible. There are exceptions. For example, if the home equity indebtedness was used to build or improve the home, the debt can be treated as acquisition debt. Interest on acquisition debt is deductible.
6. Property, State and Local Taxes
The Tax Cuts and Jobs Act places a $10,000 limit on total property, state and local taxes. This has a large impact on many California taxpayers, where homeowners have high property taxes, and taxpayers pay high state taxes.
7. Miscellaneous Deductions
Starting in 2018, miscellaneous itemized deductions that were subject to the 2% limitation will not be deductible. Taxpayers that will be affected are those who have large unreimbursed employee expenses and taxpayers with large amounts of investment fees.
8. Alimony
Alimony will no longer be deductible by the spouse who makes the payment, and alimony will no longer be taxable to the spouse who receives the payment. This tax law change applies to divorces that occur after December 31, 2018.