New Tax Bill – Tax Cut And Jobs Act – 2018

Tax Cut And Jobs Act 2018 – Update 12/21/2017

The bill itself is large and contains several tax law changes, some of which are complex, and many of which go into effect in a matter of weeks. A brief summary follows.

The nonpartisan Tax Policy Center’s analysis of the final bill states that eight in ten Americans will pay lower taxes and around five percent of people will pay more next year (2018). The five percent will mostly be folks who earn six figures and own expensive homes in locations with high local taxes, such as New York and California. The state and local tax deduction has been capped at $10,000. In summary, most people will pay less tax for the next eight years.

W-2 employees should see an increase in their take home pay starting in February 2018 as the withholding tables are adjusted.

Another group who could be unhappy with the new bill, besides those with high state and local taxes, are individuals who have unreimbursed employee expenses. This deduction is being eliminated. This is the taxpayer who completes Form 2106 (for unreimbursed employee expenses) and are able to itemize.

The Affordable Care Act (Obamacare) penalty for not having health insurance compliant with current law is being eliminated after December 31, 2018. You must be incompliance for tax year 2017 & 2018, but in 2019 you will not be penalized.

Individual tax rate changes

A more prominent change that will occur for many taxpayers will be the change in the standard deduction. The bill increases the standard deduction to $12,000 for single filers, $18,000 for heads of household, and $24,000 for joint filers in 2018 (from $6,500, $9,550, and $13,000 respectively under current law).

The personal exemption has been eliminated in 2018. Previously a taxpayer could deduct $4,050 per person. The personal exemptions for a family of four was $16,200.

For tax years 2018 through 2025, the following rates would apply to individual taxpayers: