Tax Cuts and Jobs Act of 2017

The Tax Cuts and Jobs Act of 2017 (TCJA) contains multiple amendments to the Internal Revenue Code that impact tax reporting, starting with the 2018 tax year. This section summarizes some of the changes.

 

Key changes under the tax reform plan

The tax reform changes went into effect on Jan. 1, 2018. But, most of those changes don’t impact 2017 tax returns.

1. Standard Deduction Increases

No matter your filing status, the standard deduction increases in 2018.

  • Single and Married Filing Separately: $12,000
  • Married Filing Jointly: $24,000
  • Head of Household: $18,000

2. Personal Exemption Eliminated

Under the tax reform, taxpayers can no longer claim the $4,050 personal exemption for each of their dependents.

3. Child Tax Credit Rises

The Child Tax Credit increases in value from $1,000 to $2,000. The tax reform bill also introduces a new $500 credit for non-child dependents.

4. State and Local Taxes Capped

Taxpayers can deduct up to $10,000 in state and local income taxes. Previously there was no cap.

5. ACA Individual Mandate Repealed

Beginning in 2019, individuals who choose to go without healthcare coverage for the year ll not have to pay tax penalties.

6. Mortgage Interest Deduction Drops

Individuals who purchase a home in 2018 can only deduct interest up to $750,000 in mortgage debt (previously $1 million). The interest deduction on home-equity loans is eliminated.

 

Tax breaks under tax reform are temporary

As you work to understand the Tax Cuts and Jobs Act of 2017, keep in mind all of the changes are currently temporary. Once the year 2025 rolls around, the newly revised tax rules will revert back to the old tax plan unless extended by Congress at that time.

 

2018 Tax Brackets and other changes under the tax reform plan

2018 Income tax brackets

2018 Capital gains and dividend rates

Kiddie tax

Exemptions, credits, and standard deduction

Alternative minimum tax

Qualified business income deduction

Retirement account provisions

Employee compensation provisions