Key Changes in the New Tax Bill
Individual:
- Same number of tax brackets but with changed income levels
| Income Tax Rate | Income Levels for Filing as | ||
| Current | New | Single | Married-Joint |
| 10% | 10% | $0-$9,525 | $0-$19,050 |
| 15% | 12% | $9,525-$38,700 | $19,050-$77,400 |
| 25% | 22% | $38,700-$82,500 | $77,400-$165,000 |
| 28% | 24% | $82,500-$157,500 | $165,000-$315,000 |
| 33% | 32% | $157,500-$200,000 | $315,000-$400,000 |
| 33%-35% | 35% | $200,000-$500,000 | $400,000-$600,000 |
| 39.6% | 37% | $500,000+ | $600,000+ |
- Eliminates most itemized deductions
- Moving expenses (except for military)
- Alimony payment (starting in 2019 for divorce signed in 2018). Alimony payment will not be taxed as income
- Keeps deductions for charitable contributions (limit goes up to 60%), mortgage interest, and retirement savings
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- Limits mortgage interest to first $750,000 (reduced from $1 million)
- Home equity lines of credit deduction is not allowed
- Current mortgage-holders are grandfathered and not affected (before 12/15/2017)
- Keeps deduction for student loan interest
- Keeps graduate student tuition assistance as non-income
- Can deduct up to $10,000 in state and local taxes (currently unlimited)
- Must choose between property and income taxes or sales taxes
- Expands deduction for medical expenses for 2017 and 2018
- 5% or more of income (current limit is 10% or more)
- Doubles the standard deductions
- Single from $6,350 to $12,000
- Married-Joint from $12,700 to $24,000
- Reverts to current level in 2026
- Repeals Obamacare tax on uninsured
- Eliminates personal exemptions
- Currently subtracts $4,150 from income for each person claimed
- Estate tax exemption is doubled but keeps the 40% rate
- Single to $11.2 million and couples to $22.4 million
- Reverts to current level in 2026
- AMT (alternative minimum tax) is kept but
- Increased the exemption from $54,300 to $70,300 for single
- Increased exemption from $84,500 to $109,400 for joint
- Exemptions phase out at $500,000 for single and $1 million for joint
- Reverts to current level in 2026
- Increases tax credit for child from $1,000 to $2,000
- Phasing out at $400,000 rather than the current $110,000 for joint filers
- Reverts to current level in 2026
- Allows $500 credit for non-child dependent
- Allows 529 savings plan use for tuition at private and religious K-12, and some home school expenses
- 1031 exchange limited to real estate only
- Life insurance to annuity is kept
Business:
- Corporate tax rate reduced from 35% to 21%
- Pass-through businesses (Sole proprietorships, Partnerships, S-Corp, LLC & LLP) can deduct 20% of income
- Limited at $157,500 for single and $315,000 for joint
- Top tax rate drops from 39.6% to 29.6%
- Limits corporation’s ability to deduct interest rate expenses to 30% of income
- 1st 4 years income is EBITDA but reverts to EBIT thereafter
- Allows depreciation deduction in one year instead of several
- Does not applies to structures
- Equipment must be purchased after 9/27/2017 and before 1/1/2023
- 179 limit goes up to $1 million
- Eliminates corporate AMT
- “Worldwide” tax system to “territorial” system
- Current system did not incurred tax until corporations brought foreign income home
- New system does not tax foreign profit
- One-time 15.5% tax rate on cash and 8% tax rate on equipment for repatriation
- Allows oil drilling in Arctic National Wildlife Refuge
- Retains tax credits for electric vehicles and wind farms
- Cuts deduction for orphan drug research from 50% to 25%
- Cuts taxes on beer, wine and liquor
NEW TAX LAW
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Document from New York Times with credit to NYT