Tax Cuts and Jobs Act Summary
December 27, 2017
With the recent passage of the Tax Cuts and Jobs Act, many changes to the Internal Revenue Code will be implemented starting in 2018. Here are some of the most notable changes:
1. Starting in 2018, personal exemptions are repealed.
2. The child tax credit will increase to $2,000 per qualifying child ($1,400 refundable) under 18 years old.
3. The standard deduction will increase to $12,000 for Single, $18,000 for Head of Household, and $24,000 for Married Filing Jointly.
4. Taxpayers can claim a deduction for a combination of state and local taxes, sales tax, and property tax deductions up to $10,000. If you own property in a foreign country, you can no longer deduct the real property tax.
5. The deduction for mortgage interest is now capped at $750,000 of debt incurred after December 15, 2017. Any interest on home equity loans will no longer be deductible.
6. With the exception of state and local income taxes, mortgage interest, medical expenses, disaster losses, and charitable contributions, all other itemized deductions have been repealed.
7. For medical expenses incurred in 2017 and 2018, those exceeding 7.5% of income will be deductible. That percentage will increase to 10% of income in 2019.
8. Beginning with new divorces in 2019, alimony payments to an ex-spouse are no longer deductible and not taxable to the recipient.
9. Distributions from Section 529 Plans of up to $10,000 per beneficiary (made after December 31, 2017) can now be used for tuition expenses for public, private or religious K-12 schools. This is now on a per student basis rather than a per account basis.
10. The estate and gift tax has been doubled to approximately $11,000,000 for estates of decedents dying and gifts made after December 31, 2017 and before January 1, 2026.
11. The penalty for failing to maintain minimum essential coverage through the Affordable Care Act is repealed beginning in 2019.