The New Tax Changes of 2018 That Affects You
Standard Deduction
The standard deduction is the amount that you can deduct from your income before 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, according to the TPC analysis. The increased deduction ends after 2025.
Personal Exemptions
A personal exemption is the amount that you can deduct from your income for every taxpayer
and 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 can 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 would increase up to $2,000 per child, and the first $1,400 would be refundable according to the TPC analysis, meaning the credit could reduce your tax liability below zero and you would still be able to receive tax refund.. The cut off foe the tax credit would increase 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 income or sales taxes. For more information, see our item “The Facts on the SALT Deduction.”
New law: The SALT deduction will be capped at $10,000. The deduction ends after 2025.
Mortgage Deduction
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 $70,000 for new debt incurred after Dec. 31, 2017. Also, homeowners may not claim a deduction for existing and new interest on home equity debt, beginning Jan. 1, 2018. The mortgage deduction changes expire after 2025.
Medical Expense Deduction
Previous law: Taxpayers who itemize their taxes can deduct medical expenses that exceed 10 percent of their adjusted gross income, or AGI, according to the IRS. New law: Taxpayers can deduct medical expenses that exceed 7.5 percent of AGI in 2017 and 2018, but the new deduction level ends in 2019.
Limits on Itemized Deductions
Previous law: Itemized deductions may be limited, and total itemized deductions may be phased out ((reduced), I your adjusted gross income for 2017 exceeds $313,800 for married couples filing jointly or qualifying widows ($261,500 for single filers, $2887,650 for heads of household and $156,900 for married couples filing separately), according to the IRS. New law: The itemized deduction limits are repealed through the 2025 tax year.
Lifetime Learning Credit
The Lifetime Learning Credit is a tax credit for 20% of up to $10,000 (totaling $2,000) in combined college tuition and mandatory fees for a parent, spouse and their children in a given year. In 2018, raised income limits will make the credit available to more families. It’s important to know there is no double-dipping allowed, which means the expenses used to generate the Lifetime Learning Credit can’t be included in your total 529 qualified expenses. You’re also ineligible o claim the Lifetime Learning Credit if you are claiming the American Opportunity Tax Credit (AOTC).
2018 Lifetime Learning Credit income limit Gross Income in excess of $57,000 ($$114,000 if married and filing jointly) is used to determine the amount of Lifetime learning Credit, up from $56,000 and $112,000 in 2017. Note: The Tax Cuts and Jobs Act, released earlier this month proposes eliminating the Lifetime Learning Credit.
Individual Income Tax Rates
The bill maintains seven individual income tax brackets, but changes the tax rates and thresholds. See the changes below. Previous law: These are the tax brackets that individual taxpayers will use when filing taxes in 2018 for the 2017 tax year, according to the IRS.
If Tax Rate is 10%: Single is $0-$9.525; Married Filing Joint is $0-$19.050; Head of Household is $0-13,600; and Married Filing Separately is $0-$9,525.
If Tax Rate is 12%: Single is $9,525-$38,700; Married Filing Joint is $19.050-$77,400; Head of Household is $13,600-$51,800; and Married Filing Separately is $9,525-$38,700.
If Tax Rate is 22%: Single is $38,700-$82,500; Married Filing Joint is $77,400-$165,000; Head of Household is $51,800-$82,500; and Married Filing Separately is $38,700-$82,500.
If Tax Rate is 24%: Single is $82,500-$157,500; Married Filing Joint is $165,000-$315,000; Head of Household is $82,500-$157,500; and Married Filing Separately is $82,500-$157,500.
If Tax Rate is 32%: Single is $157,500-$200,000; Married Filing Joint is $315,000-$400,000; Head of Household is $157,500-$200,000; and Married Filing Separately is $157,500-$200,000.
If Tax Rate is 35%: Single is $200,000-$500,000; Married Filing Joint is $400,000-$600,000; Head of Household is $200,000-$500,000; and Married filing Separately is $200,000-$500,000.
If Tax Rate is 37%: Single is Over $500,000; Married Filing Joint is Over $600,000; Head of Household is Over $500,000, Married Filing Separately is Over $300,000.