How New Tax Provisions Are Affect Individuals

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The Tax Cuts and Jobs Act Not Only Impacts Business But Also Individual Taxpayers. Here’s A List Of The Tax Provisions That Affect Individual Taxpayers.  

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As the Tax Cuts and Jobs Act (TCJA) is in full swing, it has brought about many significant changes not only to business and corporate taxation policies but also to the individual taxation policies and norms. Many of the tax regulations and deductions that were previously in operation are no longer applicable now. Thus, the new law mandates that individuals now rethink and redesign their tax strategies and deductions accordingly.

Here’s a list of some of the key tax provisions that impact individual taxpayers.

 

Individual Tax Rates

While the Act still maintains the seven bracket structure, the tax rates have been modified to 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The new tax rates are scheduled to stay put till December 31, 2025, and will be adjusted for inflation in the future.

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Needless to say, the revised tax rates inevitably mean that the W-4 withholding of individuals has also changed. Now, both employers and employees have to conduct a paycheck checkup and readjust the withholding amount in accordance with the new withholding tables.

 

Standard and Itemized Deductions

The TCJA has doubled the standard deduction to $12,000 for single individuals, $18,000 for head-of-household filers, and $24,000 for married couples filing jointly. Also, the standard deductions for the blind and elderly still stand. However, the Act has eliminated and reduced the ceilings for many itemized deductions including:

 

  • The SALT (state and local tax) deductions stand at $10,000 (both income and property taxes) for a particular tax year. This figure stands at $5,000 for married couples filing separately.
  • The mortgage interest deduction now stands at $750,000 of acquisition debt on either a primary or second residence. Home equity debt deductions are exempt from deductions. However, any acquisition debt that has been taken prior to December 15, 2017, stands protected under the grandfathered clause and hence, remains unaffected by the tax reform.
  • Personal deductions (for yourself, or your spouse, or any other dependant) have been eliminated till December 31, 2025.
  • All miscellaneous itemized deductions (subject to 2% of AGI) have been suspended till December 31, 2025.
  • For 2017 and 2018, the threshold for medical expense deductions has been reduced for any unreimbursed medical expenses exceeding over 7.5% of AGI for all taxpayers.
  • The deduction for alimony and separate maintenance payments have been eliminated for any divorce or separation agreements signed after December 31, 2018.
  • Moving expenses are exempt from deduction, with the exception being only in the case of individuals serving in the US Armed Forces who require to move on account of a military order.

 

Estate Tax

The new tax reform has doubled the estate exemption to $11.2 million for single individuals and $22.4 million for married couples.

 

Child Tax Credit (CTC)

The TCJA has raised the CTC to $2,000 from the previous $1,000 credit, with $1,400 being totally refundable. The CTC is scheduled to phase out at an AGI of $4,00,000 for married couples filing jointly and $2,00,000 for single individuals. However, all the qualifying dependants who do not receive the $2,000 credit, a non-refundable credit of $500 is issued to them.

 

529 Education Savings Plans

Post-TCJA, the 529 Education Savings plan stands modified and are subject to the rules laid down in Notice 2018-58. Now, the tax-free distributions for both elementary and secondary schools are limited to $10,000 per student in any given year.

 

ABLE Contributions

Under the new tax reform, a designated beneficiary of an ABLE (Achieving a Better Life Experience) account holder can contribute an additional amount of money into the account even after reaching the maximum contribution limit. However, this additional amount should be

  • Less than the federal poverty line for a one-person household, and,
  • Less than the individual’s (the ABLE account holder) compensation for a given tax year.  

 

Retirement Savings Account Contributions

The federal tax reform has raised the ceiling for contributions to retirement plans including 401(k), 403(b) and most 457 plans, and the Thrift Savings Plan to $18,500 (previously this limit was $18,000).

For more details on the various tax provisions of the federal tax reform, you can visit the official page of the IRS. Or you could contact our tax experts who’ll fill you in with all the necessary details related to your queries. Write to us at tax@mytaxfiler.com or call us at 1-(888)-482-0279 today!

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