A Quick Comparison Of Tax Reform Changes

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

(You can download a prettier, more colorful version as a pdf here.)

The IRS has not yet issued the new tax rates for 2019 (Bloomberg has made their predictions here). You can see the tax rates for 2018 here.

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

(You can download a prettier, more colorful version as a pdf of the Schedule A changes here.)

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: