Well, it’s done. Congress has passed and President Trump signed a major tax overhaul.
As the bill becomes law, here are 12 things you need to know as an individual starting in 2018.
- Still seven (7) tax brackets, but different rates. (see below)
- Double the standard deduction – For single filers went from $6,350 to $12,000; for married filing jointly went from $12,700 to $24,000.
- Goodbye to the personal exemption: the personal exemption in 2017 is $4,050 per person.
- The state and local tax deduction have $10,000 ceiling. Previously, filers could deduct an unlimited amount for state and local property taxes, plus income or sales taxes.
- The child tax credit has been doubled to $2,000 for children under 17. Single parents who make up to $200,000 or Married Couple who make up to $400,000 can claim the entire credit.
- $500 temporary credit for non-child dependents. If you support an adult child or elderly parents, this may apply to you.
- Alternative Minimum Tax is not eliminated. However, the exemption has been raised to $70,300 for singles and to $109,400 for married couples.
- Lowered mortgage interest deduction (except for current homeowners). Anyone buying a new home will only be able to deduct the first $750,000 of their mortgage debt (down from $1,000,000).
- No more home interest deduction on Home Equity Line of Credit when you use it for personal use such as credit card consolidation, new car, education, etc.
- 529 plan can be used beyond just college expenses. Now, up to $10,000 per year, you can use it to cover the cost of elementary or secondary school.
- No more individual mandate on health insurance.
- If you are writing the checks to your ex-spouse for alimony, no more alimony payment tax deduction. This provision will apply to couples who’s agreement is effective for any divorce or separation instrument executed after December 31,
2018.
| 2017 Tax Rates – Single Taxpayers | 2018 Tax Rates – Single Taxpayers | ||||
| 10% | $ – | $ 9,325 | 10% | $ – | $ 9,525 |
| 15% | $ 9,325 | $ 37,950 | 12% | $ 9,525 | $ 38,700 |
| 25% | $ 37,950 | $ 91,900 | 22% | $ 38,700 | $ 82,500 |
| 28% | $ 91,900 | $ 191,650 | 24% | $ 82,500 | $ 157,500 |
| 33% | $ 191,650 | $ 416,700 | 32% | $ 157,500 | $ 200,000 |
| 35% | $ 416,700 | $ 418,400 | 35% | $ 200,000 | $ 500,000 |
| 39.60% | $ 418,400 | 37% | $ 500,000 | ||
| 2017 Tax Rates – Married Jointly & Surviving Spouses | 2018 Tax Rates – Married Jointly & Surviving Spouses | ||||
| 10% | $ – | $ 18,650 | 10% | $ – | $ 19,050 |
| 15% | $ 18,650 | $ 75,900 | 12% | $ 19,050 | $ 77,400 |
| 25% | $ 75,900 | $ 153,100 | 22% | $ 77,400 | $ 165,000 |
| 28% | $ 153,100 | $ 233,350 | 24% | $ 165,000 | $ 315,000 |
| 33% | $ 233,350 | $ 416,700 | 32% | $ 315,000 | $ 400,000 |
| 35% | $ 416,700 | $ 470,700 | 35% | $ 400,000 | $ 600,000 |
| 39.60% | $ 470,700 | 37% | $ 600,000 | ||
| 2017 Tax Rates – Married Filing Separately | 2018 Tax Rates – Married Filing Separately | ||||
| 10% | $ – | $ 9,325 | 10% | $ – | $ 9,525 |
| 15% | $ 9,325 | $ 37,950 | 12% | $ 9,525 | $ 38,700 |
| 25% | $ 37,950 | $ 76,550 | 22% | $ 38,700 | $ 82,500 |
| 28% | $ 76,550 | $ 116,675 | 24% | $ 82,500 | $ 157,500 |
| 33% | $ 116,675 | $ 208,350 | 32% | $ 157,500 | $ 200,000 |
| 35% | $ 208,350 | $ 235,350 | 35% | $ 200,000 | $ 300,000 |
| 39.60% | $ 235,350 | 37% | $ 300,000 | ||
| 2017 Tax Rates – Head of Household | 2018 Tax Rates – Head of Household | ||||
| 10% | $ – | $ 13,350 | 10% | $ – | $ 13,600 |
| 15% | $ 13,350 | $ 50,800 | 12% | $ 13,600 | $ 51,800 |
| 25% | $ 50,800 | $ 131,200 | 22% | $ 51,800 | $ 82,500 |
| 28% | $ 131,200 | $ 212,500 | 24% | $ 82,500 | $ 157,500 |
| 33% | $ 212,500 | $ 416,700 | 32% | $ 157,500 | $ 200,000 |
| 35% | $ 416,700 | $ 444,500 | 35% | $ 200,000 | $ 500,000 |
| 39.60% | $ 444,500 | 37% | $ 500,000 | ||
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