Tax Cuts & Jobs Act : 14 Changes Every Individual Must Know About
Tax Cuts & Jobs Act brought under the Trump tax plan is now a reality . Here is my selection of fourteen tax changes that affect Individual Americans in the year 2018 .There are many other changes in the tax provisions that will indirectly affect individuals . but these 14 tax changes are most important tax laws that will either increase the tax or decrease the tax ( most of them however are beneficial changes as tax cuts have been legislated ).
Fourteen Tax Changes Affecting You from 2018
1.Tax Cuts & Jobs Act (trump taxes) now a law as per President Trumps’ tax plan , is made applicable from 2018.The legislation affecting individuals will expire by the end of 2025.
2.Seven tax brackets with lower rates for individuals
Seven tax brackets based on their income. But the rates for some of these brackets have been lowered. The new rates are: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Find out tax bracket for 2018
3. The standard deduction has essentially been doubled.
Republicans want fewer people to itemize their taxes. To achieve this, they’ve nearly doubled the standard deduction. For single filers, the standard deduction has increased from $6,350 to $12,000; for married couples filing jointly, it’s increased from $12,700 to $24,000.
4. The personal exemption is no more.
Previously, you could claim a $4,050 personal exemption for yourself, your spouse and each of your dependents. But the under new tax bill , the personal exemption is no more available for anyone.
5. The state and local tax deduction capped at $10,000.
The state and local tax deduction, or SALT, remains in place for those who itemize their taxes — but now there’s a $10,000 cap. Previously, filers could deduct an unlimited amount for state and local property taxes, plus income or sales taxes.
6. New child tax credit added.
The child tax credit has doubled to $2,000 for children under 17. It’s also now available, in full, to more people. The entire credit can be claimed by single parents who make up to $200,000, and married couples who make up to $400,000. Also taxpayers may now claim a $500 temporary credit for non-child dependents. This can apply to a number of people adults support, such as children over age 17, elderly parents or adult children with a disability.
7. Alternative minimum tax exemption raised
The alternative minimum tax, a parallel tax system that ensures people who receive a lot of tax breaks still pay some federal income taxes, remains in place for individuals. But fewer people will have to worry about calculating their tax liability under the AMT moving forward. The exemption has been raised to $70,300 for singles, and to $109,400 for married couples.
8. Mortgage interest deductionÂ lowered.
Current homeowners are in the clear. But from now on, anyone buying a new home will only be able to deduct the first $750,000 of their mortgage debt. That’s down from $1 million. This is likely to affect people looking for homes in more expensive coastal regions.
9. Many deductions stays
- student loan interest up to $2,500 per year stays as it is.
- Medical expenses deduction remained with small modificationÂ that filers can deduct medical expenses that add up to more than 7.5% of adjusted gross income up from the threshold for most Americans was 10% of adjusted gross income.
- If you’re a teacher, you can still deduct classroom supplies upto $ 250.
- The electric car tax creditÂ up to $7,500 stays
- Exemption for sale of home stays up to $500,000 (or $250,000 for single filers) from capital gains, so long as they’re selling their primary home and have lived there for two of the past five years.
- Tuition waivers for grad students remain tax-free.
10. Multi use of 529 savings accounts allowed
In the past, funds invested in 529 savings accounts could only be used for college expenses. Now, up to $10,000 can be distributed annually to cover the cost of sending a child to a “public, private or religious elementary or secondary school.”
11. Tax deduction for alimony payments withdrawn.
Alimony payments related to any divorce or separation paperwork after December 31, 2018. will not be allowed
12. Many deductions gone !
- Deduction for moving expenses is also gone .However .,some exceptions for members of the military are provided for.
- Tax preparation expense deduction no more allowed …
- The reimbursement for bicycle commuters up to $20 from your income per month gone
13. The disaster deduction restricted
People can only claim disaster deduction if the disaster is notified as national disaster.
14. Estate tax exemption doubled
Estate tax, which applies to the transfer of property after someone dies. The exemption limit was setÂ at $5.49 million for individuals, and at $10.98 million for married couples . Now this limit has been doubled .