10 Takeaways from the Tax Cuts and Jobs Act
The most drastic change to American tax law in 30 years was signed on December 22, 2017. With substantial changes to all areas of taxation, we’ve highlighted 10 major areas of interest to our clients.
1. The New Tax Brackets are highlighted in orange, in the table to the right.
2. Tax deductions for Personal Exemptions are no longer allowed.
3. The Standard Deduction has increased to $12,000 for single filers, $18,000 for the head of household, and $24,000 for joint filers.
4. The Capital Gains Provision retains the present law’s 0%, 15%, and 20% tax rates on net capital gains and qualified dividends.
5. The Mortgage Interest Deduction is limited on up to $750,000 of acquisition indebtedness. The new lower limit does not apply to homes purchased prior to December 15, 2017. The previous limit of $1,000,000 is grandfathered on existing acquisition indebtedness. Also, the deduction of interest on home equity loans is suspended.
6. Alimony payments are no longer deductible by the payor or included in the income of the payee. This applies to any divorce or separation agreement made after December 31, 2018.
7. The Corporate Tax Rate for tax years beginning after December 31, 2017 is set to a flat 21%.
8. Regarding Meals and Entertainment, there will no longer be a deduction allowed for entertainment, amusement, recreation, membership dues for any club organized for business, pleasure or recreation, or facilities used in connection with any of the aforementioned activities. Food and beverages remain 50% deductible.
9. Itemized Deductions are limited to $10,000 for State and Local Taxes (SALT). This applies to real property taxes, personal property taxes, and income taxes.
10. The Estate Tax Basic Exclusion increased from $5 million to $10 million, indexed for inflation from 2011. The basic exclusion for 2018 for an individual is $11.2 million, and for a joint filer it is $22.4 million.
The above list of items is merely an overview of selected items from the Tax Cuts and Jobs Act. If you need anything explained further or in more detail regarding your taxes, please contact us.