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The Tax Cuts and Jobs Act is the most significant tax legislation in over 30 years. Below are some of the significant changes. 

- TAX RATES 2018 -

Individuals:

10%  Up to $9,525

12%  $9,526 to $38,700

22%  $38,701 to 82,500

24%  $82,501 to $157,500

32%  $157,501 to $200,000

35%  $200,001 to $500,000

37%  Over $500,000

Married Filing Jointly:

10%  Up to $19,050

12%  $19,051 to $77,400

22%  $77,401 to $165,000

24%  $165,001 to $315,000

32%  $315,001 to $400,000

35%  $400,001 to $600,000

37%  Over $600,000

Married Filing Separately:

10%  Up to $9,525

12%  $9,526 to $38,700

22%  $38,701 to 82,500

24%  $82,501 to $157,500

32%  $157,501 to $200,000

35%  $200,001 to $300,000

37%  Over $300,000

STANDARD DEDUCTION INCREASES:

Individuals & MFS:

2018 - $12,000

2017 - $6,500

Married Filing Jointly:

2018 - $24,000

2017 - $13,000

Head of Household:

2018 - $18,000

2017 - $9,550

PERSONAL EXEMPTION ELIMINATED:

Under the tax reform, taxpayers can no longer claim the $4,050 personal exemption for themselves and dependents. 

CHILD TAX CREDIT INCREASES:

The Child Tax Credit increases from $1,000 to $2,000. The tax reform bill also introduces a new $500 credit for non-child dependents. The phase out income limit also increased from $110,000 for couples to $400,000 and from $75,000 for single filers to $200,000.

ACA (AFFORDABLE CARE ACT) MANDATE REPEALED:

Beginning in 2019, individuals who choose to go without healthcare coverage for the year will not have to pay a tax penalty. 

ITEMIZED DEDUCTIONS:

STATE AND LOCAL TAXES (SALT) CAPPED:

Taxpayers can deduct up to $10,000 in state and local income taxes. Previously there was no cap.

MORTGAGE INTEREST DEDUCTION DROPS:

Individuals who purchase a home in 2018 can only deduct interest up to $750,000 in mortgage debt (previously $1 million). The interest deduction on home-equity loans is eliminated unless it is used to buy, build or improve the home that secures the loan.

MISCELLANEOUS DEDUCTION:

Misc. deductions subject tot he 2% of AGI are no longer deductible. Examples are unreimbursed employee business expenses, investment expenses and tax preparation fees. 

BUSINESS DEDUCTIONS FOR S-CORP, PARTNERSHIPS, SCHEDULE C AND E FILERS:

These entities are entitled to take a deduction equal to 20% of the "qualified business income" earned from the business with certain limitations. 

  • Qualified business income is best thought of as ordinary, non-investment income. Stated in another way, this is the revenue the business generated less applicable expenses. We ignore things like interest or dividend income or capital gains from the sale of property. 

CONSUMER ALERTS ON TAX SCAMS:

Note the IRS will NEVER:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes. 

  • Threaten to immediately ring in local police or other law-enforcement groups to have you arrested for not paying. 

  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe. 

  • Ask for credit or debit card numbers over the phone.