The Tax Cut and Jobs Act were passed by Congress and signed by President Trump last week. Essentially, it lowered individual tax rates, especially for wealthier taxpayers, and made a major cut in the corporate tax rate. The changes will apply to the 2018 tax year. That means next year will still mostly follow the current tax laws.
There is more:
- Personal exemptions are gone beginning in 2018. For 2017 tax returns, a taxpayer can claim a personal exemption of $4,050 for him/herself, his/her spouse and qualifying dependents. Gone!
It gets better
- For 2017 returns, The Standard Deduction amounts are $6,350 for single filers; $9,350 for heads of households; and $12,700 for married filing jointly couples. In 2018, those amounts will go to $12,000 for single filers; $18,000 for heads of households; and $24,000 next year for married couples filing jointly.
- Mortgage interest deduction remains, but for new home loan for your primary residence or a second home there’s a lower cap. You’ll only be able to deduct the interest on debt up to $750,000 rather than the $1 million currently allowed. If you already had a ginormous mortgage by Dec. 15, don’t worry. Your huge loan and its big interest amount is grandfathered so this limit won’t affect you.
That’s not all:
- Medical Expenses still be allowed and actually made easier to claim, at least for a while.
- Charitable Donations was increased. The limitation on the cash amounts given to nonprofits to 60 percent of the giver’s income.
- Casualty losses also will still be able to be claimed, but only when they are due to losses from a major, presidentially declared disaster. Other casualty and theft losses will no longer be deductible.
But wait there’s more:
- Obamacare mandate survives short-term:The Affordable Care Act was barely touched. However, what was repealed — effective in 2019 — was the requirement that nearly everyone have insurance or pay a penalty at tax time.
- Corporate tax rate slashed: The corporate tax rate will be slashed to 21 percent, replacing the current 35 percent tax rate.
Want to know the best part?
We will observe much more news about other changes in the new law along with more details and analysis and tax planning strategies. So please stay tuned.
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