Individual Tax Updates 2018

The Tax Cuts and Jobs Act of 2017 (Act), was signed into law in late 2017.  The changes are generally effective for tax year 2018. This law made numerous tax changes that effect the individual tax payer. The following is a brief overview of these changes and what they mean to you the tax payer. 

Here is the new tax brackets adjusted downwards from previous years.

Tax Bracket TrustsMJFHOHSingle MFSEstates
10%$0$0$0$0
12%$19050$13600$9525$9525
22%$77400$51800$38700$38700
24%$165000$82500$82500$82500$2500
32%$315000$157500$157500$157500
35%$400000$200000$200000$200000$9150
37%$600000$500000$500000$300000$12500

Individual responsibility for non-exempt taxpayers are required under the Affordable Care Act to maintain health coverage or pay a penalty. This continues in 2018. However, the Act reduces the penalty to zero after tax year 2018.

No personal exemption. 

AMT exemption amounts are increased to $109400 and $70300 for MFJ and unmarried HOH respectively. 

Standard deduction has been increased to $24000 MFJ, $18000 HOH, and $12000 Single and MFS.

Various changes have been made to the Child Tax Credit or CTC. 

CTC increased from $1000 to $2000.

$1400 of the CTC is refundable and is increased annual by cost of living adjustment.

Taxpayers may claim $500 for a dependent other than a child.

Taxpayers filing MFJ threshold for eligibility for CTC increased from $110000 to $400000

Other filers threshold increased from $75000 single, or $200000 MFS.

There have been some changes to itemized deductions on Schedule A.

Unreimbursed medical expenses in excess of 7.5% of taxpayers AGI are deductible for 2017 and 2018.

Mortgage interest deduction on mortgage debt incurred after 12152017 is limited to interest on $750000 (down from $1000000.)

AGI limitation of cash contributions to certain private foundations increased from 50% to 60%.

Miscellaneous itemized deductions subject to 2% is suspended.

Moving expense deduction is suspended. Except if you are in the military for relocation.

After 12312018 No more deduction of paid alimony or the inclusion of income of such.

Eliminating the phaseout of itemized deductions for high wage taxpayers.

Limiting the deduction for state and local taxes, sales tax and property tax deduction capped off at $10000 and $5000 MFS.  

Broadening the definition of eligible education expenses under §529 College Savings Plans to include annual tax-free distributions for elementary and secondary school. 

Estate and gift tax exclusion has been increased to $11.18 million in 2018

Under the Act, IRC §408A(d)(6)(B)—the provision permitting recharacterizations of Roth conversions— is repealed. Thus, recharacterization of a traditional IRA conversion to a Roth IRA is unavailable after 12/31/17.