Tax Cuts and Jobs Act: Impact on Individuals

Below is an overview of the tax provisions in the Tax Cuts and Jobs Act (TCJA) that have an impact on individuals.  While this is not a comprehensive list, these are some of the more important elements of the new law.  Please feel free to contact our office to discuss any of these tax provisions and how they impact you specifically.

  • Tax rates – The new tax rate structure contains seven tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.  The rates applicable to net capital gains and qualified dividends did not change.
  • Standard deduction – The standard deduction increases to $24,000 for joint filers, $18,000 for heads of household, and $12,000 for singles and married taxpayers filing separately.   With these increases, many taxpayers will no longer be itemizing deductions.
  • Exemptions – Personal and dependency exemptions have been eliminated.
  • Child and family tax credit – The credit for qualifying children increases to $2,000 and there is a new $500 credit for a taxpayer’s dependents who are not qualifying children.
  • State and local taxes – The itemized deduction for state and local income and property taxes is limited to $10,000.
  • Mortgage interest – Beginning with loans taken out in 2018, the itemized deduction for mortgage interest on loans used to acquire a principal residence and a second home is only deductible on debt up to $750,000.  The deduction for interest on home equity loans has been eliminated.
  • Miscellaneous itemized deductions – Miscellaneous itemized deductions have been eliminated.  These deductions included items such as tax prep fees, investment expenses, union dues, and unreimbursed employee expenses.
  • Medical expenses – Itemized deductions for medical expenses are deductible to the extent they exceed 7.5 percent of adjusted gross income.
  • Casualty and theft losses – This itemized deduction has been suspended except for losses incurred in a federally declared disaster.
  • Moving expenses – The deduction for job-related moving expenses has been eliminated with the exception of certain military personnel.
  • Alimony – Alimony will no longer be deductible by the paying spouse and will not be taxable to the receiving spouse for divorces and separations that occur after 2018.
  • Health care “individual mandate” – Beginning in 2019, individuals who fail to obtain minimum essential health coverage will no longer be penalized.