(Originally posted 01/25/2018)
The bill that recently passed both Houses of Congress and signed by President Trump makes significant changes in your personal income taxes. Here are some highlights of the final tax reform bill:
Lowering of Tax Rates. New brackets are 10%, 12%, 22%, 24%, 32%, 35%, and a top bracket of 37% starting at $600,000 of Taxable Income
Pass-through entities will receive a deduction of up to 20% of the income from the pass-through
Standard deduction will be raised to $24,000 for Married taxpayers, $12,000 for Single and $18,000 for Head of Household
The deduction for Personal Exemptions is repealed
The Child Tax Credit rises to $2,000
Cash Charitable contributions limit raised to 60% of Adjusted Gross Income (AGI)
For 2017 and 2018 medical expense threshold is reduced to 7.5%
529 Plans can be used to pay for elementary or secondary school expenses including tuition
State income taxes and property taxes are limited to a combined amount of $10,000. Additionally, the bill prevents the deduction of taxes prepaid for a later year effective for the 2017 tax year.
Mortgage interest limited to loans below $750,000. Loans in place are exempted. Home equity interest will no longer be deductible.
The Alternative Minimum Tax (AMT) exemption is raised but AMT will continue
2% Miscellaneous Itemized Deductions have been repealed
The phase out of itemized deductions has been repealed
Moving expenses will no longer be deductible
Alimony is no longer deductible or picked up as income for agreements starting in 2019. Any old divorce settlements will continue to use the currently existing rules.
Note: Almost all of the items listed above will expire and return to the 2017 law after tax year 2025 if Congress fails to extend them or make them permanent.