The new tax bill has passed into law and there will be some major changes taking place for 2018. We’ve lost some deductions, gained others, and certain provisions have become significantly different. With all these changes, it can be a bit confusing trying to figure out how much your taxes will actually cost. Here is a quick look at the top points you need to understand about the new tax law.
What we lost
- Marriage penalty (mostly)
- Health insurance penalty (in 2019)
- Personal exemptions
- Itemizing
- Deductions for moving expenses, tax preparation, losses due to casualty and theft (except federally declared disasters)
What we gained
- Increased standard deduction
- Increased Child Tax Credit (under 17)
- $500 Temporary credit for non-child dependents
- Medical expenses deductible if exceeds 7.5 % of income vs. 10%
- Contributions increased by $500 for certain retirement plans - 410(K), 403(b), most 457 plans, and Thrift Savings Plan
What stayed the same
- Child and Dependent Care Credit
- Lifetime Learning Credit
- Student Loan Interest deduction
What changed
- SALT (state and local taxes) deduction limited to $10,000
- Mortgage interest deductible limit lowered from 1.1 million to $750,000
- Home equity debt not deductible
New personal tax brackets
There are still seven tax brackets, but the brackets have been changed and tax rates have been lowered.
Single
Standard deduction increases from $6,500 to $12,000
Alternative minimum tax (AMT) exemption increases from $54,300 to $70,300
Estate tax lifetime exemption increases to $11.2 million
Head of Household
Standard deduction increases from $9,550 to $18,000
Alternative minimum tax (AMT) exemption increases from $54,300 to $70,300
Estate tax lifetime exemption increases to $11.2 million
Married Filing Jointly
Standard deduction increases from $13,000 to $24,000
Alternative minimum tax (AMT) exemption increases from $84,500 to $109,400
Estate tax lifetime exemption increases to $22.4 million
Married Filing Separately
Standard deduction increases from $6,500 to $12,000
Alternative minimum tax (AMT) exemption increases from $42,250 to $54,700
Estate tax lifetime exemption increases to $22.4 million
Income limits for IRAs
Income phase-out limits have been raised for savers contributing individual retirement accounts, depending on coverage by workplace retirement plans
Sources:
https://www.congress.gov/bill/115th-congress/house-bill/1/text
https://www.fool.com/taxes/2017/12/29/your-complete-guide-to-the-2018-tax-changes.aspx
https://www.forbes.com/sites/robertberger/2017/12/17/the-new-2018-federal-income-tax-brackets-rates/
https://www.cnbc.com/2018/02/16/10-tax-changes-you-need-to-know-for-2018.html