On December 22, 2017 President Trump signed the biggest tax legislation changes in three decades, Tax Cuts and Jobs Act. Here are some of the highlights under the new tax law:
- individual rates will be temporarily lowered,
- the standard deduction will be doubled
- state and local tax itemized deductions limited to $10,000
- the limit on qualifying acquisition debt is reduced to $750,000 ($375,000 for a married taxpayer filing separately).
- there is no longer a deduction for interest on home equity debt
- corporate tax rates dramatically reduced.
- new 20% deduction for certain individuals, trusts, and estates with respect to qualifying income of pass-through entities and sole proprietorships
- Kiddie tax modified
- Increased Section 179 expensing including expanded qualified real property category
- Temporary 100% cost recovery of qualifying business assets
- Deductions for entertainment expenses will no longer be allowed
- The law also eliminates the Affordable Care Act’s mandate for individuals to have health insurance or pay a penalty.
While these changes will lower rates at many income levels, determining the overall impact on any particular individual or family will depend on a variety of other changes made by the Tax Cuts and Jobs Act, call us if you wish to discuss how they or any of the many other changes in the Act could affect your particular tax situation, and the possible tax planning steps you might consider in response to them.
Read more about What the tax reform bill means for individuals in the Journal of Accountancy.