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After much drama and pushing through congress at lightning speed, the 2017 Tax Cuts and Jobs Act is on the verge of being passed by the house and senate and on to President Trump’s desk.

The legislation is poised to make one of the largest changes to the tax code in several decades. The legislation includes a permanent re-write of the corporate tax code and temporary changes to the individual tax code (subject to revert to the current law in 2025). In addition, with projected growth increases it is poised to increase the deficit by $1.5 trillion.

To see how the tax legislation may impact your personal situation, I have created a chart below to compare the current law with the proposed changes. As with all tax advice, we always recommend consulting with a CPA to review your personal situation.

2017 Tax Cuts and Jobs Act Comparison

 

Current  Law

Proposed Law

Tax Brackets and Rates 7 Brackets. Maximum Tax Rate of 39.6% Keeps the 7 brackets but lowers tax rates for most. Lowers top rate to 37%
Inflation Adjustments Current inflation adjustments use the Regular Consumer Price Index (CPI) calculation. New inflation adjustments use “Chained CPI.” This calculation tends to lead to lower inflation increases.
Corporate Tax Rate Up to 35% Reduced to 21% for C Corporations. Pass-Through entities would receive a 20% deduction applied to income. However there are exceptions to this at certain thresholds for service businesses such as lawyers, accountants & financial advisors.
Estates and Trusts Tax Brackets 5 tax brackets with top rate of 39.6% once income exceeds $12,500. Reduced to 4 brackets with a reduced top rate of 37% once income exceeds $12,500.
Above the Line Deductions You can deduct expenses such as student loan interest, moving expenses, alimony and teacher expenses. Deductions for student loan interest and out of pocket teacher expenses with limits remain. The alimony deduction is repealed in 2019 for divorce agreements after 12/31/18.
Standard Deduction $6,350 for singles and $12,700 for those filing jointly Nearly doubled standard deduction to $12,000 for singles and $24,000 for those filing jointly. If you are over 65, blind or disabled you have an additional deduction of $1,300.
Personal Exemptions $4,050 personal exemption allowed for each household member and dependent. Personal exemptions are eliminated.
PEASE Limitation and Personal Exemption Phaseouts (PEP) Itemized deduction phase-outs at certain income threshholds and reduction of personal exemptions based on income. Repealed.
Federal Estate Tax 40% tax on estates valued over $5.49 million per person ($10.98 million for spouses) 40% tax remains. Exemptions are doubled to $11.2 million per person and over $22 million for spouses.
Retirement Savings Contributions (401k) Employees can contribute up to $18,500/yr in 2018 and $24,500 in 2018 if over age 50. No changes.
Capital Gains Rates 0% – 23.8% depending on income for assets held for one year or longer. This included the 3.8% Obamacare Surtax. No changes. Plan to force First in First out sales of tax lots was not implemented. 0% Capital gains ends at income of $38,600 for individuals and $77,200 for married.  3.8% Surtax kicks-in at $200,000 of AGI for singles and $250,000 for married.
State and Local Sales, Income and Property Taxes Unlimited deduction Capped deduction of $10,000 in combined taxes.
Mortgage Interest Deduction Mortgage interest on indebtedness up to $1 million deductible for first and second homes. Mortgage interest on indebtedness up to $750,000 is deductible for first and second homes on new mortgages acquired after 12/15/17. There are no changes for current mortgages. Additionally, the deduction up to $100,000 of home equity loans or lines of credit is eliminated.
Home Sale Exclusion You can exclude up to $250,000 for singles and $500,000 for spouses of home sale gains if you lived in the home for 2 of previous 5 years. No Changes.
Charitable Giving Deduction Itemized deduction for charitable gifts up to 50% of AGI Increased AGI limit to 60% for cash donations.
Medical Expense Deduction Allows deduction of medical expenses on expenses over 10% of AGI.  Some Taxpayers can deduct expenses above 7.5% of AGI for 2016. Allows deduction of medical expenses on expenses over 7.5% of AGI (for 2017 and 2018). After 2018 the threshold increases to 10% again.
Miscellaneous Itemized Deductions You can deduct miscellaneous deductions which exceed 2% of AGI. Miscellaneous deductions which exceed 2% of AGI are eliminated. This includes unreimbursed employee expenses, home office expenses and tax preparation fees.
Child Care Tax Credit $1,000 per child phasing out with income over $75,000 for single and $110,000 for spouses. Doubled to $2,000 per child with $1,100 is refundable. Income limits increased to $200,000 for singles and $400,000 for spouses before phase-outs. This will help offset the personal exemption elimination.
AMT Dual tax system designed to ensure higher income earners do not escape taxation. Income thresholds have not kept up with inflation affecting the middle class Individual AMT remains. However the exemptions were increased from $54,300 to $70,300 for singles and $84,500 to $109,400 for joint filers meaning very few will pay AMT. The corporate AMT was eliminated.
529 Plans Can be used for Higher Education only. Can now be used for elementary and secondary schools with a cap of $10,000 tax free for K-12 expenses per student each year.
Obamacare Individual Mandate Currently you pay a penalty if you do not have healthcare coverage. The penalty is eliminated.
Back-Door Roth Contributions Ability for high income individuals to make Roth Contributions even if their income is above the AGI limits No changes.
Sunset Provisions in New Law Corporate tax cuts are permanent. Individual provisions expire in 2025.
Source: http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-466.pdf
https://www.kitces.com/blog/final-gop-tax-plan-summary-tcja-2017-individual-tax-brackets-pass-through-strategies/