get ya tax cuts, heeere!
President Trump has signed the Tax Cuts and Jobs Act into law.
So what does it mean for you?
Some provisions of the law—like lower tax withholding—will likely be noticeable to you before you file your 2017 taxes. However, other provisions—like the increase of the standard deduction—won’t be apparent until you file your 2018 taxes in 2019.
What else is changing?
• Though there was much debate about reducing the number of tax brackets, the law preserves the current 7 income tax bracket structure; however it lowers almost all of the tax rates. Bear in mind these new lowered rates are not permanent: they go into effect in 2018 and expire after 2025.
• The standard deduction has nearly doubled for both single filers and those who are married and file jointly. The standard deduction for single filers has been raised to $12,000, up from $6500. For married couples filing jointly, the standard deduction is raised to $24,000 (from $13,000 under current law). These changes also sunset after 2025.
• The law repeals the individual mandate. The individual mandate is a provision of Obamacare that levies tax penalties against individuals who don’t obtain health insurance. While most of the other individual tax changes expire after 2025, the repeal of the individual mandate will not.
• The law means big changes for itemized deductions, as well. It reduces the mortgage interest deduction for married couples filing jointly to $750,000, (down from $1,000,000 under current law). It also limits the deduction for state and local taxes (SALT) to $10,000. These changes remain in effect through 2025.
What stays the same?
There was much discussion about contribution changes for retirement plans and HSAs, and the future treatment of student loan interest. Health Savings Accounts (HSAs) are not affected, and 401(k) and IRA contribution limits remain unchanged. Although the House bill would have repealed the deduction for student loan interest expenses, the Tax Cuts and Jobs Act preserves this deduction.
Of course, these provisions are just a few items to be aware of. Changes to the estate tax exemption, the corporate tax rate, pass-through business income deductions, etc. will keep individuals and business owners (and their CPAs) busy well into the year, as they strive to understand exactly how the law will impact them. And as always, we will continue to watch this space!
Stay warm out there, and contact us with any questions: