President Trump signed the H.R. 1 (The Tax Cuts and Jobs Act) bill on December 22, 2017. The bill will impact almost every individual and business and is the biggest tax change in the past 30 years. The following is a summary of the highlights of the bill. Many of the changes of the code are temporary with no guarantee that a future Congress will extend them.
Remember these changes do not affect your 2017 income tax!
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2017 Tax Law |
H.R. 1 (2018) |
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Tax rates |
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| 10%, 15%, 25%, 28%, 33%, 35% & 39.6% | 10%, 12%, 22%, 24%, 32%, 35% & 37% |
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Filing Thresholds |
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| MFJ/Qualifying Widow(er) $20,800.00 | MFJ/Qualifying Widow(er) $24,000.00 |
| HoH $13,400.00 | HoH $18,000.00 |
| Single $10,400.00 | Single $12,000.00 |
| MFS $4,050.00 | MFS $0.00 |
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Standard Deduction |
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| MFJ $12,700.00 | MFJ $24,000.00 |
| HoH $9,350.00 | HoH $18,00.00 |
| All Others $6,350.00 | All Others $12,000.00 |
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Personal Exemption |
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| $4,050.00 | Repealed |
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Pass through income |
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| Taxed same as individual | 20% deduction |
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Kiddie Tax |
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| Unearned income in excess of $2,100.00 taxed at parents’ tax rate | Unearned income taxed at trust & estate tax rates |
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Discharge of student loan debt |
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| Considered income unless meets certain exceptions | Discharges during 2018-2025 not considered income if discharge was due to student’s death or total and permanent disability |
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Alimony |
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| Payor is allowed deduction from income and recipient reports as income | Repeals deduction for alimony payments and inclusion in income for divorce/separation executed after 12/31/18 |
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Qualified higher education expense |
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| Includes expenses for tuition in connection with enrollment or attendance at a post-secondary school | Includes expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school |
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Shared Responsibility Payment & Maintaining Minimum Essential Coverage |
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| Penalty if do not maintain minimum essential health insurance coverage | Penalty if do not maintain minimum essential health insurance coverage |
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Child Tax Credit |
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| Up to $1,000.00 refundable credit | $2,000.00 credit (refundable credit up to $1,400.00) |
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Education credits |
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| American Opportunity credit equals 100% of the first $2,000.00 of a student’s qualified education expenses plus 25% of the next $2,000.00. Maximum credit is $2,500.00 per student (40% refundable) | American Opportunity credit equals 100% of the first $2,000.00 of a student’s qualified education expenses plus 25% of the next $2,000.00. Maximum credit is $2,500.00 per student (40% refundable) |
| Lifetime Learning credit is a 20% non-refundable credit of up to $10,000.00 of qualified education expenses. Maximum credit $2,000.00 per return | Lifetime Learning credit is a 20% non-refundable credit of up to $10,000.00 of qualified education expenses. Maximum credit $2,000.00 per return |
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Itemized Deductions |
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| Phase out limits:
Single $261,500.00 MFJ or Qualifying widow(er) $313,800.00 MFS $156,900.00 |
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| Can deduct medical expenses in excess of 7.5% of AGI | Can deduct medical expenses in excess of 7.5% of AGI |
| State and local taxes fully deductible | Up to $10,000.00 ($5,000.00 MFJ) of state and local taxes are deductible for the primary residence and/or auto of the Taxpayer or spouse |
| Mortgage interest $1 mil limit | Mortgage interest $750,000.00 limit |
| Home equity interest deductible | Home equity interest no longer deduction |
| Maximum charitable donations are 50% of adjusted gross income
Charitable donations of $250.00 or more require contemporaneous written acknowledgment |
Maximum charitable donations are 60% of adjusted gross income
Charitable donations of $250.00 or more require contemporaneous written acknowledgment |
| Casualty losses from sudden events are deductible | Casualty losses are only deductible if they are due to an event that has been declared a federal disaster |
| Miscellaneous itemized expenses subject to 2% of AGI | No miscellaneous itemized expenses |
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Section 179 Deduction |
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| Deduction limit $500,000 | Deduction limit $1 mil |
| Spending cap $2.0 mil | Spending cap $2.5 mil |
| 50% bonus depreciation until 9/27/17 | 100% bonus depreciation |
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Estate & Gift Tax |
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| CT lifetime exclusion $2.0 mil | CT lifetime exclusion $2.6 mil |
| Federal exclusion $5.49 mil
Federal gift tax exclusion amount $14,000.00 per year per person |
Federal gift tax exclusion amount $15,000.00 per year per person |
Prepare for the 2018 income tax year and contact Esposito Tax Services at 203-296-0391 for a comprehensive tax review and recommendation.
Information is being provided as a courtesy. You should seek professional tax advice prior to carrying out any income, gift or estate tax plan.
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