Tax Reform Legislation 

2017 REFORM

The biggest tax reform in our generation has passed both by Senate and the House, sign by President Donal Trump on Friday, Dec. 22 before leaving for his Christmas break.

With that said this leaves many taxpayer wondering. What is in the bill, and how will this affect them. We have your back, working to make sure that we are updated in the latest changes to answer any questions you may have. The following is a recap of some of the key parts of the Tax Bill.

Tax rates

For the years 2018 through 2025, the bill maintains the seven tax brackets found in our current law but lowers certain tax rates. 

• The current brackets are: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%

• The new brackets will be: 10%, 12%, 22%, 24%, 32%, 35% and 37%

The current income threshold has also changed.​​

Child tax credit

The act increased the amount of the child tax credit to $2,000 per qualifying child. The maximum refundable amount of the credit is $1,400. The act also created a new nonrefundable $500 credit for qualifying dependents who are not qualifying children. The threshold at which the credit begins to phase out was increased to $400,000 for married taxpayers filing a joint return and $200,000 for other taxpayers.

Standard Deduction

The act increased the standard deduction through 2025 for individual taxpayers to $24,000 for married taxpayers filing jointly, $18,000 for heads of household, and $12,000 for all other individuals. The additional standard deduction for elderly and blind taxpayers was not changed by the act.

Personal exemptions

The act repealed all personal exemptions through 2025. The withholding rules will be modified to reflect the fact that individuals can no longer claim personal exemptions.

State and local taxes/Home mortgages

The bill limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes have generally been fully tax deductible.

The bill also caps the amount of mortgage indebtedness on new home purchases on which interest can be deducted at $750,000 down from $1,000,000 in current law.

Health Care

The bill eliminates the tax penalty for not having health insurance after December 31, 2018. It also temporarily lowers the floor above which out-of-pocket medical expenses can be deducted from the current law floor of 10% to 7.5% for 2017 and 2018

So for 2017 and 2018, you can deduct medical expenses that are more than 7.5% of your adjusted gross income as opposed to the higher 10%

Conclusion

This highlighted some key parts of the bill there is no need for you to memorize any changes to our tax law. We are here to help you if you have any further questions feel free to reach out to us at 951-335-5521 or taxreform@yoursimpletax.com