Written by partridgecpas

2018 Tax Reform

2018 Tax Reform

On January 1st, 2018, Congress passed the largest piece of tax reform in more than 30 years. This bill will affect most taxpayers for the 2018 tax year.

Wondering what’s in the new tax bill and how it might affect you? Here’s is a quick summary of some of the most major tax provisions in the new bill and how they affect you.

Lowered Tax Rates and Income Ranges Changed

The 7 tax brackets found in the current law retain but lowers the number of tax rates. Income thresholds are also changed at which the rates apply.

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Current Tax Brackets:

  • 10%
  • 15%
  • 25%
  • 28%
  • 33%
  • 35%
  • 6%

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New Tax Brackets:

  • 10%
  • 12%
  • 22%
  • 24%
  • 32%
  • 35%
  • 37%

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Income thresholds have changed as well.

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Current Income Thresholds
(Married Joint Filers)

  • 10% – $0 to $18,650
  • 15% – $18,651 to $75,900
  • 25% – $75,901 to $153,100
  • 28% – $153,101 to $233,350
  • 33% – $233,351 to $416,700
  • 35% – $416,701 to $470,700
  • 6% – More than $470,700

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New Income Thresholds
(Married Joint Filers)

  • 10% – $0 to $19,050
  • 12% – $19,051 to $77,400
  • 22% – $75,401 to $165,000
  • 24% – $165,001 to $315,000
  • 32% – $315,001 to $400,000
  • 35% – $400,001 to $600,000
  • 37% – More than $600,000

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Current Income Thresholds
(Single Filers)

  • 10% – $0 to $9,325
  • 15% – $9,326 to $37,950
  • 25% – $37,951 to $91,900
  • 28% – $91,901 to $191,650
  • 33% – $191,651 to $416,700
  • 35% – $416,701 to $418,000
  • 6% – More than $418,000

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New Income Thresholds
(Single Filers)

  • 10% – $0 to $9,525
  • 12% – $9,526 to $38,700
  • 22% – $38,901 to $82,500
  • 24% – $82,501 to $157,500
  • 32% – $157,501 to $200,000
  • 35% – $200,001 to $500,000
  • 37% – More than $500,000

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AMT Exemptions Increased

The new tax bill raises the income exempted for married filing jointly from $84,500 to $109,400 (adjusted for inflation) and single filers from $54,300 to $70,300 (adjusted for inflation), so fewer taxpayers will pay it.

Tax Relief For Families and Individuals

Standard Deduction Increase:

This tax law almost doubled the previous standard deduction amount. Single filer’s deductions jumped from $6,350 to $12,000.

Married joint filers increased from $12,700 to $24,000.

Child Tax Credit Increase:

The child tax credit doubled from $1,000 to $2,000 per child. Also, the amount refunded went from $1,100 to $1,400. It also adds a non-refundable credit of $500 if are claiming dependents other than children. It also raised the income threshold from $110,000 to $400,000 at which these benefits phase out for married couples.

Reductions or Eliminations In Deductions

Dependent & Personal Deductions

The new bill eliminates the personal and dependent exemptions which were $4,050.

Local & State Taxes/Home Mortgages

The new bill eliminated the amount of local and state property, sales, and income taxes that may be deducted to $10,000. In the previous year, these taxes were generally fully tax deductible.

The new bill also puts a cap on the amount of mortgage indebtedness for new home purchases on which interest may be deducted at $750,000 vs $1,000,000 in the previous law.

Health care Changes:

The new bill eliminated the tax penalty for no health insurance. It also temporarily lowered the floor above which out-of-pocket medical expenses can be deducted in the previous law from %10 to $7.5%. So when you are filing taxes in 2019, you can deduct medical expenses that are greater than 7.5% of your AGI.

Self-employed (freelancers, contractors, sole proprietors) and small businesses:

The new bill has many new changes for business. The biggest change includes reducing the top corporate rate to 21%, a 20% deduction for incomes from certain types of “pass-through” entities (sole proprietorships, S Corps, partnerships), limits on expensing of interest from borrowing, just about doubling the amount a small business can expense from section 179 amount of %510,000 to $1,000,000, and eliminated the corporate alternative minimum tax.

Partridge & Associates Offers Tax Preparation in Scottsdale, Arizona

These tax changes apply for filing taxes in 2019. If you have more questions about taxes or need a great tax preparation expert, you can contact Partridge & Associates today to get your tax question answered and have your taxes filed for you. Learn more about our expert tax preparation services in Scottsdale. We offer business tax preparation, small business tax preparation, personal tax preparation, and more.

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