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TAX REFORM
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 Form 1040 for Everyone |
| There is now only one consolidated form 1040 for all taxpayers. The 1040A and/or 1040EZ are no longer available. There are supporting schedules needed for some taxpayers. As you input your tax information, the schedules will populate, if needed. |
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| Lower Tax Rates | ||
| With the passage of the TCJA, tax rates for individuals have been lowered to 10%, 12%, 22%, 24%, 32%, 35% and 37%. In early 2018, the IRS released new withholding tables for wage earning taxpayers. You should have noticed a difference in your paycheck from the new withholding tables. The new tax rates will be effective until December 31, 2025. Tax bracket tables are below. | ||
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| Single Individuals and Married Filing Separately | |
| If taxable income is: | Then income tax equals: |
| Not over $9,525 | 10% of the taxable income |
| Over $9,525 but not over $38,700 | $952.50 + 12% of the excess over $9,525 |
| Over $38,700 but not over $82,500 | $4,453.50 + 22% of the excess over $38,700 |
| Over $82,500 but not over $157,500 | $14,089.50 + 24% of the excess over $82,500 |
| Over $157,500 but not over $200,000 | $32,089.50 + 32% of the excess over $157,500 |
| Over $200,000 but not over $500,000 | $45,689.50 + 35% of the excess over $200,000 |
| Over $500,000 | $150,689.50 + 37% of the excess over $500,000 |
| Heads of Household | |
| If taxable income is: | Then income tax equals: |
| Not over $13,600 | 10% of the taxable income |
| Over $13,600 but not over $51,800 | $1,360 + 12% of the excess over $13,600 |
| Over $51,800 but not over $82,500 | $5,944 + 22% of the excess over $51,800 |
| Over $82,500 but not over $157,500 | $12,698 + 24% of the excess over $82,500 |
| Over $157,500 but not over $200,000 | $30,698 + 32% of the excess over $157,500 |
| Over $200,000 but not over $500,000 | $44,298 + 35% of the excess over $200,000 |
| Over $500,000 | $149,298 + 37% of the excess over $500,000 |
| Married Filing Jointly and Surviving Spouses | |
| If taxable income is: | Then income tax equals: |
| Not over $19,050 | 10% of the taxable income |
| Over $19,050 but not over $77,400 | $1,905 + 12% of the excess over $19,050 |
| Over $77,400 but not over $165,000 | $8,907 + 22% of the excess over $77,400 |
| Over $165,000 but not over $315,000 | $28,179 + 24% of the excess over $165,000 |
| Over $315,000 but not over $400,000 | $64,179 + 32% of the excess over $315,000 |
| Over $400,000 but not over $600,000 | $91,379 + 35% of the excess over $400,000 |
| Over $600,000 | $161,379 + 37% of the excess over $600,000 |
| Increased Standard Deduction |
| Under the TCJA the standard deduction for all filing statuses has been increased. The new standard deduction is listed below for each filing status. The additional standard deduction for the elderly and the blind is not changed by the provision. |
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| Filing Status | Standard Deduction |
| Married Individuals Filing Joint Returns & Surviving Spouses | $24,000 |
| Heads of Households | $18,000 |
| Single (other than Surviving Spouse & Heads of Household) | $12,000 |
| Married Individuals Filing Separate | $12,000 |
| Elimination of Personal Exemptions | ||
| Beginning January 1, 2023 (and through December 31, 2030) the personal exemption deductions have been suspended for all taxpayers. You will no longer receive an exemption for each dependent claimed on your tax return. | ||
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| Schedule A Changes | ||
| 1. Limit on overall Schedule A Itemized deductions for high income AGI earners is suspended | ||
| 2. Eligible medical expenses that exceed 7.5% of AGI are deductible (down from 10% in 2017) | ||
| 3. Deduction for state & local income, sales & property taxes is limited to $10,000 | ||
| 4. Deduction for mortgage interest is limited to interest you paid on a loan secured by your main home or second home that you used to buy, build, or substantially improve your main or second home. (i.e. interest paid on home equity loans will NOT be deductible unless the proceeds were used to buy, build, or substantially improve your main or second home). a. Interest expense deduction is limited to the first $750,000 of qualified residence loans | ||
| 5. Limit on cash charitable contributions has increased from 50% to 60% of AGI | ||
| 6. Net personal casualty and theft losses are deductible only to the extent they're attributable to a federally declared disaster. Claims must include the FEMA code assigned to the disaster. | ||
| 7. Previous deduction for job-related expenses or other miscellaneous itemized expenses that exceeded 2% of AGI has been suspended. | ||
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| Higher Capital Gain Thresholds | ||
| The TCJA generally retains the present-law maximum rates on net capital gain and qualified dividends. The breakpoints are based on the same amounts as the breakpoints under present law, except the breakpoints are indexed using the C-CPI-U in taxable years beginning after December 31, 2017. Unlike the CPI-U, the C-CPI-U accounts for the ability of individuals to alter their consumption patterns in response to relative price changes. The C-CPI-U accomplishes this by allowing for consumer substitution between item categories in the market basket of consumer goods and services that make up the index, while the CPI-U only allows for modest substitution within item categories. The provision requiring C-CPI-U indexing after 2017 is permanent. | ||
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| New Capital Gain Breakpoints for 2018 | ||
| Filing Status | 15-percent Breakpoint | 20-percent Breakpoint |
| Married Individuals Filing Joint Returns and Surviving Spouses | $77,200 | $479,000 |
| Married Individuals Filing Separate | $38,600 | $239,500 |
| Heads of Household | $51,700 | $452,400 |
| Single (other than Surviving Spouses and Heads of Households) | $38,600 | $425,800 |
| Increased Child Tax Credit (CTC) & Additional Child Tax Credit (ACTC) |
| The maximum credit increased to $2,000 per qualifying child (up from $1,000 in 2017). Taxpayers who are eligible can get $1,400 of the credit as a refundable credit for each qualifying child as the additional child tax credit (claimed on Form 8812). The income threshold at which the CTC phases out is increased to $400,000 for married filing jointly. Qualifying children must have a Social Security Number issued by the Social Security Administration before the due date of your return to be eligible for the CTC or ACTC. |
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| Moving Expenses Suspended |
| The deduction for moving expenses is suspended for tax years beginning after December 31, 2017. No deduction is allowed for use of an automobile as part of a move. The suspension does NOT apply to members of the U.S. Armed Forces (or their spouses and/or dependents) on active duty who move pursuant to a military order related to a permanent change of station. In addition, employers will now include moving expense reimbursement as taxable income in employees' wages. |
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| Credit for Other Dependents |
| New non-refundable credit of up to $500 for each qualifying dependent (other than children claimed for CTC). The qualifying dependent must be a U.S. citizen, U.S. national, or U.S. resident alien. The credit is calculated with the child tax credit in the form instructions. The total of both credits is subject to a single phase out when AGI exceeds $200,000 or $400,000 if married filing jointly. |
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| AMT Exemption Increased |
| The AMT exemption amount is increased to $70,300 ($109,400 MFJ). The income level at which AMT exemption begins to phase out has increased to $500,000 ($1,000,000 MFJ). This effectively means that less taxpayers will be subject to AMT tax. |
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| Section 179 Deduction Increased |
| In 2018, the maximum deduction under Section 179 increases to $1 million. The phaseout threshold amount increases to $2.5 million for qualifying property placed in service during the year. The deduction applies to BOTH new and used property. As always, the deduction is not allowed for property held for the production of income, such as rental property, however, it has been expanded to include certain tangible personal property used predominantly to furnish lodging or in connection with furnishing lodging. 100% bonus depreciation has been extended to December 31, 2023 |
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| Section 199A QBI Deduction |
| Eligible taxpayers may be entitled to a deduction of up to 20 percent of qualified business income (QBI). They may also be entitled to a deduction of up to 20 percent of their combined qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. Please see the following link for additional details. http://www.irs.gov/newsroom/tax-cuts-and-jobs-act-provision-11011-section-199a-qualified-business-income-deduction-faqs. |
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