Please note that this is not an endorsement of any law or political party, I am merely writing to help you better understand the current proposed tax law changes.
Although it has not yet been passed, or even reconciled between the 2 arms of Congress, there has been a great deal of anxiety regarding the proposed 2018 tax law overhaul. There are several parts to this bill, including changes to the corporate, individual, and estate tax laws. I will mainly focus on the individual taxes changes in this article, however keep in mind that the corporate tax rate will reduce to 20% in hopes that corporations keep more of their money within the United States, and the estate tax exemption is doubling to $11 million per person. The individual tax law changes mainly will be focused on changing deductions and credits, including revamping the itemized deduction limits (Schedule A).
Some of the Proposals
As I mentioned, although there are some changes to the corporate and estate tax codes, our main concern will be with the individual tax code changes. I would like to provide a somewhat comprehensive list of changes here:
- The top tax rate is reducing from 39.6% to 38.5%. There are less proposed brackets, and the brackets will be expanding (which means that more income will be taxed at a lower rate.
- The State and Local Income Tax Deduction on Schedule A would be eliminated. The real estate tax deduction will be reduced to $10,000 (that really only affects some areas of the country).
- The student loan interest deduction would be eliminated.
- The mortgage interest deduction would only be on up to the first $500,000 of debt, down from $1,000,000. Again, this only really affects some areas of the country.
- Unreimbursed employee expenses and other itemized deductions would also be eliminated. Despite what some people believe, business expenses would not be eliminated.
- Although many itemized deductions are being limited, the standard deduction will be doubled.
- The personal exemption would be eliminated, but the child tax credit would be doubled from $1,000 to $2,000.
- The alternative minimum tax would still be in place, but the exemption would be increased (basically reducing the chance of middle class families being subject to the alternative minimum tax).
What It Means For You
The proposed tax overhaul seems complicated, but I have done my best to break down the main points. The corporate tax rate will be lowering (and the write off of some assets will also change) along with the exemption for the estate tax doubling.
The main focus of the tax bill is to overhaul the individual tax code. Many deductions are being phased out while the standard deduction and child tax credit are being increased. I would be more than happy to discuss any of your questions or concerns with the upcoming tax law or with any of your general comments or concerns.
I am generally available any time of the day, and would be happy to set up after hours and weekend appointments. I look forward to easing your concerns and discussing how this will affect your individual situation. I can be reached via email (firstname.lastname@example.org) or phone (973-879-9111).
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