Tax Cuts and Jobs Act of 2017

Resources for Tax Law Changes

https://www.irs.gov/newsroom/resources-for-tax-law-changes

Reduced Individual Tax Rates

News Article

https://www.irs.gov/newsroom/2018-withholding-tables-now-available

Notice 1036 Early Release Copies of the 2018 Percentage Method Tables for Income Tax Withholding

https://www.irs.gov/pub/irs-pdf/n1036.pdf

Individual MFJ Single Head-of-Household Estate, Trust,

Tax Rates Kiddie Tax
10% $0 - 19,050 $0 - 9,525 $0 – 13,600 $0 – 2,550
12% $19,051 – 77,400 $9,526 – 38,700 $13,601 – 51,800 N/A
22% $77,401 – 165,000 $38,701 – 82,500 $51,801 – 82,500 N/A
24% $165,001 – 315,000 $82,501 – 157,500 $82,501 – 157,500 $2,551 – 9,150
32% $315,001 - 400,000 $157,501 – 200,000 $157,501 – 200,000 N/A
35% $400,001 – 600,000 $200,001 – 500,000 $200,001 – 500,000 $9,151 – 12,500
37% Over $600,000 Over $500,000 Over $500,000 Over $12,500

Capital Gains Tax Rates 15% 20%

Married Filing Jointly $77,200 $479,000
Married Filing Separately $38,600 $239,500
Head-of-Household $51,700 $452,400
Estates and Trusts $2,600 $12,700
Single $38,600 $425,800

Standard Deduction Expanded

Standard Deductions and 2018 Standard Deduction

Exemptions
Single
Single, 65 or older
Married, filing a joint return
Married, filing a joint return,
one spouse 65 or older
$12,000 Standard Deduction
$12,000 Standard Deduction + 1,600 additional
$24,000 Standard Deduction
$24,000 Standard Deduction + 1,300 additional
 Married, filing a joint return,
both spouses 65 or older
Married, filing a separate return
Head-of-Household
Head-of-Household, 65 or older
Surviving spouse with a
depending child
Surviving spouse, 65 or older,
with a dependent child
$24,000 Standard Deduction +2,600 additional
$0
$18,000 Standard Deduction + 1,600 additional
$18,000 Standard Deduction + 1,600 additional
$24,000 Standard Deduction
$24,000 standard deduction + 1,300 additional deduction

Personal Exemption Eliminated

Taxpayers are no longer allowed a personal or dependency exemption. To determining appropriate filing
status, dependency status is still used. It is also used for determining eligibility for tax benefits such as
the child tax credit, earned income credit, and the American Opportunity Tax Credit, as well as other tax
credits.

Child Credit Expanded

Each qualifying child is required to have a social security number. The child tax credit increased to
$2,000 per qualifying child. Refundability of the credit is increased to 70%. Potential total refundable
credit is $1,400. There is a new nonrefundable credit of $500 for dependents who are not a qualifying
child. This new nonrefundable credit does not require a social security number for the dependent. An
example of such a dependent would be an elderly parent. The phaseout threshold for all child and
dependent credits increases to $200,000 ($400,000 MFJ). This increases the number of taxpayers
eligible for the child tax credit.

Qualified Business Income Deduction

Qualified business is defined as any trade or business other than a specified service trade or business
and other than the trade or business of being an employee. Qualified business income from a sole
proprietorship, partnership, or S Corporation is deductible at the lesser of the taxpayers combined
qualified business income or 20% of the excess of the taxpayer’s taxable income over the sum of the
taxpayer’s net capital gain and qualified cooperative dividends, plus the lesser of 20% of the taxpayers
qualified cooperative dividends or the taxpayer’s taxable income reduced by net capital gains. The
deduction is limited to 50% of the W-2 wages paid from the qualified trade or businesses or the sum of
25% of the W-2 wages of the qualified trade or businesses plus 2.5% of the unadjusted basis,
immediately after acquisition, of all qualified property in the qualified trade or businesses.

The exclusion from the definition of a qualified business for specified service trades or businesses and
the W-2 wage limit is phased out for taxpayers having taxable income more than the threshold amount
of $157,500 ($315,000 MFJ). This amount is indexed for inflation and is fully phased out for taxpayers
with taxable income greater than the threshold amount plus $50,000 ($100,000 MFJ).

The 20% deduction is not allowed for purposes of computing adjusted grows income. It is allowed as a
deduction reducing taxable income but is not an itemized deduction. It can be claimed in addition to the
standard deduction.
Modifications to “For AGI”

Alimony is not taxable for the recipient and is not deductible for the payor for divorce or separation
papers filed after December 31, 2018. For papers filed before January 1, 2019 alimony is still taxable to
the recipient and deductible for the payor.

Qualified moving expense reimbursements are not excluded from an employee’s gross income, except
for Armed Force Members on active duty moving due to military orders.

Excess business loss for non-corporate taxpayers is not deductible in the current year. Excess losses are
carried forward as part of the taxpayer’s aggregate net operating loss (NOL) to future years, applied
after the passive income limitation. The definition of excess business loss is aggregate business
deductions over the total of aggregate business income from activities that generated income, plus a
threshold amount. The threshold for MFJ is $500,000 and $250,000 for all other filing statuses and is
indexed for inflation.

Modifications to Itemized Deductions

Medical expenses deduction is reduced to a 7.5% floor for 2017 and 2018.

$10,000 cap on total itemized deductions for state and local income taxes, or sales taxes where
applicable and state and local property taxes.

Mortgage interest deduction is limited to the interest on $750,000 of the acquisition indebtedness
($375,000 MFS). The limitation holds at $1,000,000 ($500,000 MFS) for mortgages incurred before
December 15, 2017, even if the debit is refinanced later.

Home equity loan interest deduction is eliminated.

Cash contributions to public charities deduction is increased to 60% of Adjusted Gross Income. The
deduction of 80% of contributions made which entitle a taxpayer to preferential seating is eliminated.

Personal casualty and theft loss deductions are eliminated for all taxpayers except when the loss is from
a Presidentially-declared disaster area.

All miscellaneous itemized deductions subject to the 2% of AGI limitation are eliminated including tax
preparation fees, employee business expenses, investment fees, and interest, and hobby expenses.

Gambling loses, remain deductible and include the cost of wagers, as well as expenses for the gambling
activity, such as travel to and from the casino.

The phase-out of itemized deductions is eliminated.

Federal Transfer Tax Expanded

Gross estate, gifts, and generation-skipping transfer exemption is doubled to $11,200,000. This expires
after 2025, and reverts to $5,000,000 indexed to inflation in 2026.