The House and Senate have voted and passed tax reform legislation, and President Trump has signed into law. Now that tax reform is definite, below we have highlighted some of the major provisions impacting individuals. Read the corporate tax provisions.
Revised 4/9/18
Individual Tax Brackets (Expire after December 31, 2025)
- 10% for taxable incomes up to $9,525 for individuals and $19,050 for married couples
- 12% for taxable incomes up to $38,700 for individuals and $77,400 for married couples
- 22% for taxable incomes up to $82,500 for individuals and $165,000 for married couples
- 24% for taxable incomes up to $157,500 for individuals and $315,000 for married couples
- 32% for taxable incomes up to $200,000 for individuals and $400,000 for married couples
- 35% for taxable incomes up to $500,000 for individuals and $600,000 for married couples
- 37% for taxable incomes above the 35% threshold for both individuals and married couples
Business Tax Rates
- Corporate tax rate reduced from 35% to 21%
- Pass-through companies allowed a 20% deduction on domestic qualifying business income not to exceed 50% of wage income for higher-income taxpayers, but not for specified service businesses, not including architects and engineers and smaller specified service businesses. Alternatively, for the higher income taxpayers, the deduction applies to 25% of wage income plus 2.5% of the unadjusted cost of depreciable tangible assets. Contact an Anders advisor for more information on the many moving parts within this provision
Standard Deduction and Exemptions
- Raises from $6,350 to $12,000 for individuals
- Raises from $12,700 to $24,000 for married couples
- Personal exemptions are eliminated
Itemized Deductions
- Preserves medical expenses, but most others are repealed. Repeals all 2% floor itemized deductions. Casualty losses only allowed for presidentially declared disasters under section 401
- Mortgage interest deduction and charitable deduction are preserved, but with slight modifications
- The limitation on overall itemized deductions allowable is eliminated. There are no longer any phase-outs
- The limitations on cash contributions to public charities and certain private foundations are increased to 60% of AGI from 50%
Mortgage Interest Deduction
- Cap on principal residence acquisition indebtedness eligible for the mortgage interest deduction lowered from $1 million to $750,000
- Interest on home equity loans may now be limited. Learn more about the home equity loan interest limitations
State and Local Tax Deductions
- Aggregate state real property and income tax (or sales tax) expense deductions for purposes of itemizing will be allowed a cap of $10,000
- State and Local property taxes paid in carrying on a trade or business continue to be fully deductible
Family and Child Tax Credits
- A new credit for non-child dependents introduced at $500
- Child Tax Credit increases to $2,000, with $1,400 of it now being refundable and phasing out at $400,000 of income (MFJ)
Alternative Minimum Tax
- Individual AMT remains on the books, but with a higher exemption and phase-out amount
Retirement Account Changes
- Re-characterization from a Roth to traditional IRA contribution is allowed. However, if you convert a traditional to a Roth, you cannot in effect unwind this conversion under the new law
Estate and Gift Tax
- No repeal
- Increases exemption for an individual from $5.49 million to $11.18 million, indexed for inflation after 2011. A married individual could effectively transfer $22.36 million as both are allowed this exemption
- Step-up in basis for property passing to heirs at death remains in place
Other Individual Tax Changes of Note
- Alimony is no longer deductible by the payor and no longer income to the payee for divorce agreements entered into or modified in 2019 or after
- Moving expense deductions eliminated
- Employee unreimbursed business deductions eliminated
- Many employer-provided benefits to an employee can no longer excluded from income. These include fringe benefits such as employee achievement awards, transportation, commuting and qualified moving expenses
Contact an Anders advisor with questions on how tax reform will affect you or your business. Read the tax reform changes for businesses.
Our firm provides this information for general educational guidance only and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Podcasts posted by Anders CPAs + Advisors are not intended to be used and cannot be used by any individual or business, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose. Please note that some content may be generated using artificial intelligence and is intended for educational and informational purposes only. In no way does listening, reading, emailing or interacting on social media with our content establish a professional relationship.
All Insights
