All political conversation aside, you’ve probably heard there are some changes coming to the tax code in 2018. It can be challenging to comb through legislation and figure out what applies to you, so I checked in with Market Street Talent’s Controller and number extraordinaire, Sharon Hussey, to get an overview of the updates that will affect most individuals. She even color-coded it for us! Read on for Sharon’s cheat sheet – and don’t forget, tax day is April 17th!
A Condensed Explanation of Changes to Taxes
Individual Income Tax Rates
This new rate is temporary and will be in effect until 2025, unless Congress takes further action. Examples below show the difference for the most common tax brackets.
Previous Law: New Law:
Single Filers Single Filers
Tax Bracket Taxable Income Tax Bracket Taxable Income
25% $37,951-$91,900 22% $38,701-$82,500
28% $91,901-$191,650 24% $82,51-$157,500
33% $191,651-$416,700 32% $157,501-$200,000
35% $416,701-$418,400 35% $200,001-$500,000
Married, Filing Jointly Married, Filing Jointly
25% $75,901-153,100 22% $77,401-$165,000
28% $153,101-$233,350 24% $165,001-$315,000
33% $233,351-$416,700 32% $315,001-$400,000
Standard Deduction
The standard deduction is the amount that you can deduct from your income before calculating your tax liability if you do not itemize your deductions.
Previous Law: The standard deduction for married filing jointly is $12,700 for tax year 2017; $6,350 for single taxpayers; and $9,350 for heads of households, according to the IRS.
New Law: The standard deduction for married filing jointly would increase to $24,000 for joint filers; $12,000 for single taxpayers; and $18,000 for heads of households. The increase deduction ends after 2025.
Personal Exemption
A personal exemption is the amount that you can deduct from your income for every taxpayer and for most dependents claimed on your return.
Previous Law: $4,050 per person, which means a married couple with two dependents would receive a personal exemption of $16,200.
New Law: The personal exemption is eliminated. The exemption returns after 2025.
Child Tax Credit
Previous Law: Married couples filing jointly who earn less than $110,000 can receive a tax credit of up to $1,000 for each child under 17 years old that they claim as dependents on their tax returns ($55,000 is the threshold for married couples filing separately; $75,000 for single, head of household, and qualifying widow or widower filers).
New Law: The credit will increase to up to $2,000 per child. The cut off for the tax credit increases from $110,000 to $400,000 for married couples filing jointly. The expanded credit ends after 2025.
State and Local Tax Deductions
Previous Law: Taxpayers who itemize their taxes can deduct state and local property and real estate taxes, and either state and local property and real estate taxes, and either state and local income or sales taxes.
New Law: State and local tax deduction will be capped at $10,000. The deduction limit ends after 2025.
Mortgage Deductions
Previous law: Taxpayers who itemize their taxes can deduct interest payments on mortgage debt of up to $1.1 million. That includes up to $100,000 of home equity debt.
New Law: For current mortgage holders, there is no change. But the deductible limit drops to $750,000 for new debt incurred after December 31, 2017. Also, homeowners many NOT claim a deduction for existing and new interest on home equity debt, beginning January 1, 2018. The mortgage deduction changes expire after 2025.
Limits on Itemized Deductions
Previous Law: Itemized deduction may be limited, and total itemized deductions may be phased out (reduced), if your adjusted gross income for 2017 exceeds $313,800 for married couples filing jointly or qualifying widows ($261,500 for single filers, $287,650 for heads of household and $156,900 for married couples filing separately).
New Law: The itemized deduction limits are repealed through the 2025 tax year.
Capital Gains Tax Rate
This refers to profits realized from the sale of assets such as stocks or real estate. There is no change to this law.
Thank you, Sharon, for your insight on the tax changes we’re going to see in 2018! Feel free to join the conversation on Facebook or Twitter.