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 |
No deduction |
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) |
Single ($70,300) Married/jointly ($109,400) |
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 |
7.5% of AGI |
10% of AGI |
State & local income, sales, & property taxes deduction limited. |
No cap* |
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 |
Interest deductible on loans up to $750,000 |
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 |
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:
- It’s Beginning To Look A Lot Like Tax Reform
- What Your Itemized Deductions On Schedule A Will Look Like After Tax Reform
- IRS Will Issue Guidance On Tax-Reform-Inspired SALT Transactions
- For Many Taxpayers, Tax Reform Means No More Home Office Deduction
- What Tax Reform Means For Small Businesses & Pass-Through Entities
- What The New Tax Deduction For Pass-Through Businesses Looks Like In Chart Form
- What The Expanded Child Tax Credit Looks Like After Tax Reform