What’s New?

The Tax Cuts & Jobs Act, which was signed into law in 2017, mostly took effect for individual taxpayers beginning in the 2018 tax year. You can find a summary of changes here but I thought it might also be helpful to have some visuals.

Here’s a look at some of the changes and how they compare year over year:

What’s new?	2017	2018	2019
Tax rates change	Seven rates: 10%, 15%, 25%, 28%, 33%, 35% & 39.6%	Seven rates: 10%, 12%, 22%, 24%, 32%, 35% & 37%	Seven rates: 10%, 12%, 22%, 24%, 32%, 35% & 37%
Standard deduction increase	Single ($6,350) Married/jointly ($12,700) Married/separately ($6,350) HOH ($9,350)	Single ($12,000) Married/jointly ($24,000) Married/separately ($12,000) HOH ($18,000)	TBD
Personal exemption reduced	$4,050	0	0
Moving expense deduction eliminated	Above-the-line deduction available (no need to itemize)	No deduction except for active military	No deduction except for active military
Alimony deduction eliminated	Above-the-line deduction available (no need to itemize)	Above-the-line deduction available (no need to itemize)	No deduction
Expanded child tax credit	Max credit is $1,000/qualifying child Additional child tax credit is refundable	Max credit is $2,000/qualifying child Up to $1,400 is refundable $500 credit for qualifying dependents	Max credit is $2,000/qualifying child Up to $1,400 is refundable $500 credit for qualifying dependents
Alternative minimum tax (AMT) exemption increases	Single ($54,300) Married/jointly ($84,500) Married/separately ($42,250)	Single ($70,300) Married/jointly ($109,400) Married/separately ($54,700)	TBD
Healthcare shared responsibility payment changes	Health care coverage reportable & penalty applies	Health care coverage reportable & penalty applies	Penalty is zero
Pass-through entity owners & sole proprietors get a new deduction	Income taxed at individual rates	Income taxed at individual rates subject to deduction of up to 20% of qualifying business income	Income taxed at individual rates subject to deduction of up to 20% of qualifying business income

Of course, some of the most significant tax reform changes were those to itemized deductions (you can see what Schedule A might look like here). Those changes include new tax rates, limits on the deductions for state & local taxes (SALT taxes), a cap on the amount that you can borrow for purposes of the home mortgage interest (you can find additional information about the deductibility of mortgages and home equity loans here), & exclusions for certain kinds of job-related expenses (like the home office deduction).

Here’s a look at Schedule A changes and how they compare year over year:

What’s new with Schedule A?	2017	2018	2019
Medical expense deduction floor changes	7.5% of AGI retroactive to Jan 1, 2017	7.5% of AGI	10% of AGI
State & local income, sales, & property taxes deduction limited.	No cap* *AMT, Pease limitations may apply	State & local income, sales, & property taxes capped at $10,000 ($5,000 if married/separately)	State & local income, sales, & property taxes capped at $10,000 ($5,000 if married/separately)
Home mortgage interest deduction capped	Interest deductible on loans up to $1,000,000 prior to Dec 15, 2017 ($500,000 if married/separately)	Interest deductible on loans up to $750,000 ($375,000 if married/separately)	Interest deductible on loans up to $750,000 ($375,000 if married/separately)
Home equity loan interest deduction	Deductible up to $100,000	Not deductible	Not deductible
Charitable deductions for cash increased	50% of AGI	60% of AGI	60% of AGI
Casualty & theft loss deduction modified	Deductible	Deductible if attributable to federally declared disaster	Deductible if attributable to federally declared disaster
Miscellaneous itemized deductions suspended (includes unreimbursed employee expenses, tax prep fees & investment fees)	Deductible to the extent deductions exceed 2% of AGI	Not deductible	Not deductible
Overall limit on itemized deductions eliminated	Subject to Pease limitations	No limit	No limit

With so many tax reform changes, the Internal Revenue Service (IRS) has been encouraging taxpayers to consider a checkup to make sure that withholdings are correct. By plugging your current tax data into the withholding calculator on the IRS website, you can do a quick checkup and hopefully avoid any nasty surprises at year-end.

Keep in mind that these charts are meant to offer you a quick comparison, which means that some of the exceptions, caveats, and nuances (you know, all of the things that make the Tax Code so much fun) aren’t necessarily represented. For more information, click on the links above or check out some of these tax-reform related posts: