2017/2018 Tax Law Changes Summarized

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!

2017 Tax Law

H.R. 1 (2018)

Tax rates

10%, 15%, 25%, 28%, 33%, 35% & 39.6% 10%, 12%, 22%, 24%, 32%, 35% & 37%

Filing Thresholds

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

Standard Deduction

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

Personal Exemption

$4,050.00 Repealed

Pass through income

Taxed same as individual 20% deduction

Kiddie Tax

Unearned income in excess of $2,100.00 taxed at parents’ tax rate Unearned income taxed at trust & estate tax rates

Discharge of student loan debt

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

Alimony

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

Qualified higher education expense

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

Shared Responsibility Payment & Maintaining Minimum Essential Coverage

Penalty if do not maintain minimum essential health insurance coverage Penalty if do not maintain minimum essential health insurance coverage

Child Tax Credit

Up to $1,000.00 refundable credit $2,000.00 credit (refundable credit up to $1,400.00)

Education credits

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

Itemized Deductions

Phase out limits:

Single $261,500.00

MFJ or Qualifying widow(er) $313,800.00

MFS $156,900.00

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

Section 179 Deduction

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

Estate & Gift Tax

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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