On December 22, 2017 President Trump signed the Tax Cut and Jobs Act. This Act is arguably the most significant change to the Internal Revenue Code in three decades. With the potential to allow higher wages, more employment, this law reduces tax rates for individuals and corporations while also repealing many deductions, thus simplifying filing for many taxpayers.
The following will highlight some of the more notable changes taking effect after December 31, 2017.
Important Note: the Act keeps the same number of income tax brackets but will lower the tax rates, with changes evident in February 2018 withholding's. The new seven tax brackets will include tax rates of 10, 12, 22, 24, 32, 35, and 37%.
70% or so of households fail to file an itemized federal tax return. The new tax law nearly doubles a taxpayers standard deduction. The new standard in 2018 is $12,000 for individuals, $18,000 for head of households, and $24,000 for married couples filing a joint return. The 2017 deductions for individuals, head of households, and married couples filing joint returns were $6350, $9350, and $12,700 respectively.
There is a reduction in how much you can deduct of State and Local Taxes. If you happen to live in high tax state you may face a higher tax bill. The new tax law limits a households combined deduction of state and local taxes to $10,000.
Starting in 2019, alimony will no longer be tax deductible and the recipient will no longer pay taxes on money received.
There is of course much more to this new tax law, with amendments almost inevitable. So be sure to always check with your trusted tax professional.