2018 Tax Cuts: What You Need to Know

The short answer? These are the largest tax cuts since the early 80’s. Key points to remember:

• Most became effective after December 31, 2017 Most of these changes are temporary and sunset after 2025
• Guidance is needed since there are numerous things still being clarified
• There may or may not be future legislation around this plan
• States may or may not conform to these changes

Individual Income Tax Changes

For individuals, these are the key changes to take note of:

• Increase in Standard Deduction 
  • $24,000 for married individuals filing joint, $18,000 for head of household and $12,000 for single
• Repeal of the personal exemption deduction
• Alternative Minimum Tax Inflation Adjustments
• Kiddie Tax 
  • Will use Estate and Trust tax rates
• Limitations on losses for taxpayers other than corporations
• Enhancement of the child tax credit and the new family credit
  • Increased to $2,000 plus $500 nonrefundable credit
• Repeal of the overall limitation on itemized deduction
• Medical expenses threshold increase to 10%
• Modification of deduction for home mortgage interest
• SALT (State and Local Tax) limited to $10,000 max
• Repeal of Deduction for Personal Casualty and Theft losses
• Increase in Charitable deduction for 50% to 60%
• Repeal of the 2% floor miscellaneous deduction
  • Unreimbursed job expenses
  • Investment expenses
• Tax Preparation fees

2018 Tax Brackets

Below is a comparison of the 2017 and 2018 tax brackets for a quick look at the changes implemented under the new plan.

Key Takeaways:

• There are still seven tax brackets 
  • 10%, 12%, 22%, 24%, 32%, 35%, 37%
• No more dependent exemption
• Higher child tax credit ($2,000)
  • New $500 non-child dependent credit
• Increase in standard deduction
• Individual AMT not repealed but exemption amounts have increased