Tax Law Changes Under Tax Cuts And Jobs Act

On December 15th, the congressional conference committee charged with reaching a consensus on the competing versions of the Senate and House tax reform bills released its conference report containing the language of the final bill. The final bill, titled Tax Cuts and Job Acts (TCJA), is expected to be approved by both chambers next week and signed into law by the end of the year. The chart below highlights the key aspects of the final bill.

We will provide regular updates on the tax reform bill and anticipate providing live seminars on the topic starting in January, so please stay tuned.

INDIVIDUAL Topic Current Law Final Bill Rates[1] - Single 10% $0 - $9,325 15% $9,326 - $37,950 25% $37,951 - $91,900 28% $91,901 - $191,650 33% $191,651 - $416,700 35% $416,701 - $418,400 39.6% over $418,400 10% $0 - $9,525 12% $9,526 - $38,700 22% $38,701 - $82,500 24% $82,501 - $157,500 32% $157,501 - $200,000 35% $200,001 - $500,000 37% over $500,000 Rates - Married Filing Jointly & Surviving Spouses 10% $0 - $18,650 15% $18,651 - $75,900 25% $75,901 - $153,100 28% $153,101 - $233,350 33% $233,351 - $416,700 35% $416,701 - $470,700 39.6% over $470,700 10% $0 - $19,050 12% $19,051 - $77,400 22% $77,401 - $165,000 24% $165,001 - $315,000 32% $315,001 - $400,000 35% $400,001 - $600,000 37% over $600,000 Rates - Married Filing Separately 10% $0 - $9,325 15% $9,326 - $37,950 25% $37,951 - $76,550 28% $76,551 - $116,675 33% $116,676 - $208,350 35% $208,351 - $235,350 39.6% over $235,350 10% $0 - $9,525 12% $9,526 - $38,700 22% $38,701 - $82,500 24% $82,501 - $157,500 32% $157,501 - $200,000 35% $200,001 - $300,000 37% over $300,000 Rates - Heads of Households 10% $0 - $13,350 15% $13,351 - $50,800 25% $50,801 - $131,200 28% $131,201 - $212,500 33% $212,501 - $416,700 35% $416,701 - $444,500 39.6% over $444,500 10% $0 - $13,600 12% $13,601 - $51,800 22% $51,801 - $82,500 24% $82,501 - $157,500 32% $157,501 - $200,000 35% $200,001 - $500,000 37% over $500,000 Capital Gains By holding assets for one year or less, any capital gain will be considered short-term and will be taxed at ordinary income tax rates. By holding assets for one year or more, any capital gain will be considered long-term and is taxed at rates up to 20% No significant change, except the brackets will be adjusted Standard Deduction[2] Single & Married Filing Separately - $6,350 Married Filing Jointly & Surviving Spouse - $12,700 Heads of Households - $9,350 Single and Married Filing Separately - $12,000 Married Filing Jointly & Surviving Spouse - $24,000 Heads of Households - $18,000 Personal Exemption $4,050 per person in each household Eliminated Child Tax Credit[3] $1,000 per child with modified adjusted gross income phase outs at $75,000 for single and heads of households filers; $55,000 for married filing separately; and $110,000 for married filing jointly. The credit is refundable for certain filers. $2,000 per child with modified adjusted gross income phase outs at $200,000 for single, and heads of households, and married filing separately filers and $400,000 for married filing jointly. Up to $1,400 is refundable for certain filers. Medical Expense Deduction[4] Medical expenses deductible in excess of 10% of adjusted gross income. Medical expenses deductible in excess of 7.5% of adjusted gross income. State and Local Tax Deduction Individuals may deduct state and local property, income, and/or sales tax in excess of the standard deduction. Deductions for state and local taxes will be capped at $5,000 for single filers and married filing separately and $10,000 per year for married filing jointly. Any 2018 taxes that are pre-paid during the 2017 tax year will be credited toward the $10,000 limit beginning on January 1, 2018. Mortgage Interest Deduction Individuals may deduct mortgage interest on purchases of up to $1,000,000 for the primary residence plus one additional home; individuals may also deduct up to $100,000 of equity debt The mortgage interest deduction will be capped at purchases of $750,000 for mortgages taken out after December 15, 2017; deductions for equity debt will be eliminated. Casualty Losses Individuals may deduct casualty losses (including fire, theft, and other property loss) in excess of 10% of adjusted gross income, plus $100 per casualty event. Casualty losses will be allowed as a deduction only to the extent the casualty event is attributable to a federally-declared disaster. Miscellaneous Itemized Deductions Certain miscellaneous deductions (including unreimbursed business expenses, tax preparation fees, and other expenses) are permitted in excess of 2% of adjusted gross income. Eliminated Moving Expense Deduction Taxpayers may deduct moving expenses when moving due to new employment that is located at least 50 miles further than the taxpayer's previous place of employment from the taxpayer's residence. Eliminated Alimony Deduction Alimony payments are deductible by the payor as an above-the-line deduction. Eliminated for divorce instruments executed on or after January 1, 2019 or modified after such date if the modification expressly states that this rule applies. Alternative Minimum Tax (AMT) - Exemptions[5] Single filers - $54,300 Married filing jointly - $84,500 Married filing separately - $42,250 Heads of Households - $54,300 Single filers - $70,300 Married filing jointly - $109,400 Married filing separately - $54,700 Heads of Households - $70,300 Alternative Minimum Tax (AMT) - Phase-Outs[6] Single filers - $120,700 Married filing jointly...