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2018 Tax Cuts: What You Need to Know

11/15/2018

The short answer? These are the largest tax cuts since the early 80ā€™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.

2018 Rate

2018 Bracket

2017 Rates

2017 Bracket

10%

Up to $9,525

10%

Up to $9,525

12%

$9,525-$38,700

15%

$9,525-$38,700

22%

$38,700-$82,500

25%

$38,700-$93,700

24%

$82,500 ā€“ $157,500

28%

$93,700-$195,450

32%

$157,500-$200,000

33%

$195,450-$424,950

35%

$200,000-$500,000

35%

$424,950-$426,700

37%

$500,000+

39.6%

$426,700+


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  • Individual AMT not repealed but exemption amounts have increased