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Key Individual Tax Provisions

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On December 22, 2017, President Trump signed into law the 2017 Tax Cuts and Jobs Act. This is the most consequential tax change in over 30 years.

 

Below please find a very general overview of the main individual tax provisions of the law.

 

​​Proposal

​Prior Law

​New Law

​Individual tax rates
  • ​​Seven rate brackets (10%, 15%, 25%, 28%, 33%, 35%, and 39.6%)
  • Alternative Minimum Tax applies if greater than regular tax
  • 3.8% net investment income tax
  • ​​Retains the current seven rate brackets, although several rates, including the top rate, would be lowered slightly (new top rate of 37%)
  • Generally no change to capital gains or dividend tax rates
  • Alternative Minimum Tax rates are retained with increased exemption and phase out amounts
  • Retains the 3.8% net investment income tax
  • New rates and brackets expire at the end of 2025
​Enhance standard deduction
  • ​​$6,350 for single individuals; $12,700 for married individuals
  • ​​Increased the standard deduction to $12,000 for single individuals and $24,000 for married individuals
​Personal Exemption
  • ​​$4,050 for each personal exemption
  • ​​Eliminated
​Itemized deductions
  • ​​Limitation on itemized deductions
  • $1,000,000 limitation on acquisition debt for home mortgages
  • Deduction for state and local income and property taxes
  • Deduction for personal casualty losses
  • Deduction for losses and expenses from gambling activities; losses limited to winnings
  • Various deductions for charitable donations, subject to certain limitations 
  • Medical expenses are deductible to the extent they exceed 10% of AGI
  • Moving expenses deductible subject to certain limitations
  • ​​Overall limitation on itemized deductions suspended until January 1, 2026
  • Current mortgage interest deduction on existing mortgages is unchanged. Mortgage interest deduction on new debt is limited to $750,000 of acquisition indebtedness
  • Deductions for state and local taxes and property taxes combined are capped at $10,000
  • Deduction for casualty losses repealed, other than those incurred in a disaster area
  • All deductions for expenses incurred in carrying out wagering transactions are limited to wagering winnings
  • Charitable contribution deductions are modified to increase the AGI limitations on cash contributions from 50% to 60%
  • Deduction retained with the floor decreased to 7.5% of AGI
  • Moving expense deduction is eliminated except for certain U.S. Armed Forces
  • All miscellaneous itemized deductions subject to the 2% floor have been repealed
​Individual Mandate
  • ​​Individual responsibility payment
  • ​Reduced to zero for health care coverage status for months beginning after December 31, 2018
​Child tax credit
  • ​Individuals can claim a maximum child tax credit of $1,000 for each qualifying child under the age of 17
  • ​​Child tax credit is increased to $2,000 for a qualifying child
  • A $500 credit is available for dependents other than qualifying children
  • The phase-out for the credit is increased to $400,000 for joint returns
  • The refundable portion of the credit is lowered to $1,400. Taxpayers would be required to provide a work-eligible SSN to receive the credit
​Estate Tax
  • ​​40% tax levied on the net value (after exclusion of $5 million, subject to inflation adjustment) of the estate of a deceased person before distribution to the heirs
  • ​​Exclusion doubled to $10 million, indexed for inflation from 2011, effective for decedents dying and gifts made after 2017. 
  • No repeal of the estate tax is provided

 

 

This information is based on the statutes and guidance available as of the date of publication (January 2018) and is subject to change. 


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Elisa Fay

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Managing Partner Rödl National Tax

+1 404 525 2600

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