2017 Tax Reform Update

December 22, 2017

There is a lot to digest with the new tax law. mAccounting Tax Manager Ann Vincent has identified some highlights:

  • The standard deduction is doubled from $6,350 for a single/ $12,700 if married to $12,000/$24,000.
  • Deductions for personal exemptions are repealed, but the child tax credit is increased from $1,000 to $2,000.
  • There is a new temporary $500 credit for non-child dependents such as elderly parents and adult children with disabilities.
  • The top individual tax rate is reduced from 39.6% to 37%, and the threshold at which the top rate kicks in is increased from $418,000 for a single/$480,000 for married filing jointly to $500,000/$600,000. Further down the brackets, rates are reduced as well. Click here to see the seven tax brackets.
  • The corporate income tax rate is reduced from 35% to 21%.
  • Businesses will be able to immediately expense many asset purchases; after five years of 100% expensing, the rate will phase out at gradually declining rates of 80%, 60%, 40%, 20% over the next four years.
  • The Obamacare individual mandate has been repealed. For months beginning after December 2018, the amount of the individual shared responsibility payment is reduced to zero.
  • The bill will give business owners a 20 percent deduction on their pass-through income allowing them to keep more earnings tax-free. Service businesses, including law firms, medical offices, investment offices and accountants, only will be able to take that deduction if they make less than $315,000 for married couples.
  • Mortgage interest deduction has been reduced from the first million dollars of home debt to $750,000.
  • For tax years beginning after 12/31/17 and before 1/1/26, the deduction for miscellaneous itemized deductions that are subject to the 2% floor is suspended.
  • Itemized deductions for state and local taxes are capped at $10,000.  You can’t pre-pay your 2018 state and local taxes, but you can pay 2017 taxes prior to 12/31/17 and claim as an itemized deduction in 2017.
  • Expanded use of 529 account funds for distributions after 12/31/17, “qualified higher education expenses” now include tuition at an elementary or secondary public, private, or religious school up to $10,000 limit per year.
  • The estate tax exemption is doubled, to $11 million for a single taxpayer and $22 million for married taxpayers.
  • The alternative minimum tax remains but now with a higher exemption amount.