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Special sponsored page for tax years beginning after Dec. 31, 2017 through 2025.
Highlights of the New Tax Reform Law
The new tax reform law, commonly called the “Tax Cuts and Jobs Act” (TCJA), is the biggest federal tax law overhaul in 31 years, and it has both good and bad news for taxpayers. Below are highlights of some of the most significant changes affecting individual and business taxpayers. Except where noted, these changes are effective for tax years beginning after Dec. 31, 2017 through 2025.
- Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37%
- Near doubling of the standard deduction to $24,000 (married couples filing jointly), $18,000 (heads of households), and $12,000 (singles and married couples filing separately)
- Elimination of personal exemptions
- Doubling of the child tax credit to $2,000 and other modifications intended to help more taxpayers benefit from the credit
- Elimination of the individual mandate under the Affordable Care Act, requiring taxpayers not covered by a qualifying health plan to pay a penalty — effective for months beginning 2019
- Reduction of the adjusted gross income (AGI) threshold for the medical expense deduction to 7.5% for regular and AMT purposes — for 2017 and 2018
- New $10,000 limit on the deduction for state and local taxes (combined property and income)
- Reduction of the mortgage debt limit for the home mortgage interest deduction to $750,000 with certain exceptions
- Elimination of the deduction for interest on home equity debt if not used for improvements
- Elimination of the personal casualty and theft loss deduction (with an exception for federally declared disasters)
- Elimination of miscellaneous itemized deductions subject to the 2% floor (such as certain investment expenses, professional fees, and unreimbursed employee business expenses)
- Elimination of the AGI-based reduction of certain itemized deductions
- Elimination of the moving expense deduction (exceptions apply for certain members of the military)
- Expansion of tax-free Section 529 plan distributions to include those used to pay qualifying elementary and secondary school expenses, up to $10,000 per student per tax year
- AMT exemption substantial increase, to lessen the effect on middle income taxpayers
- Doubling of the gift and estate tax exemptions, to $11.2 million for 2018. Annual gift exclusion $15,000 for 2018 and 2019.
- Replacement of graduated corporate tax rates ranging from 15% to 35% with a flat corporate rate of 21% and repeal of the 20% corporate AMT
- New 20% qualified business income deduction for owners of flow-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships
- Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets — effective for assets acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023
- Doubling of the Section 179 expensing limit to $1 million and an increase of the expensing phaseout threshold to $2.5 million
- New disallowance of deductions for net interest expense in excess of 30% of the business’s adjusted taxable income (exceptions apply)
- New limits on net operating loss (NOL) deductions
- Elimination of the domestic production activities deduction (aka Section 199 deduction)
- New rule limiting like-kind exchanges to certain real property
More to consider
This is just a brief overview of some of the most significant TCJA provisions. There are additional rules and limits that apply, and the law includes many additional provisions. Contact us to learn more about how these and other tax law changes will affect you for 2018 and beyond.
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Atlanta, GA 30338