Both the House of Representative and Senate passed the final version of the Tax Cuts and Jobs Act, which will be in effect beginning 2018. Brief summaries of new tax laws are as follows:
- The new seven federal income tax brackets are 10,12,22,24,32,35,37% compared to the current tax rate of 10,15,25,28,33,35,39.6%. The final bill doubles the standard deduction: A single filer’s deduction increases from $6,350 to $12,000 while The deduction for Married and Joint Filers increases from $12,700 to $24,000. The bill suspends personal exemptions (current: $4,050).
- It limits the deduction on mortgage interest to the first $750,000 of the loan. Interest on home equity lines of credit can no longer be deducted. Current mortgage-holders aren’t affected (up to 1million can be deducted).
- The bill expands the deduction for medical expenses for 2017 and 2018. It allows taxpayers to deduct medical expenses that are 7.5 percent or more of income.
- The bill doubles the unified estate tax and gift tax exclusion amount to $10,980,000 for single.
(The annual Gift tax exemption amount itself will not be doubled but will increase up to $15,000 for 2018 ($14,000 for 2017).
- Taxpayers can deduct up to $10,000 in state and property taxes.
(If taxpayers expect their state and property taxes to be greater than $10,000, they could save more money by paying property tax bill, whose due date is April, 10, 2018, before the end of year 2017 or by prepaying state income tax of 2017, which is due by January 15, 2018, at the end of year 2017).
- The final bill increases the Child Tax Credit from $1,000 to $2,000. Credit is refundable up to $1,400.
- Starting in 2019, the new legislation eliminates the Affordable Care Act (Obamacare)’s individual mandate.
- The new bill lowers the corporate tax rate from 35 to 21 percent.
- The new bill eliminated the Alternative Minimum Tax(AMT) for corporations.
Should you have any other questions or concerns, please contact our office.