212.658.0122    718.279.1600 NChin@vjnassociates.com

How The New GOP Tax Bill Will Hit Your Wallet

 

 

It’s being billed as a “massive tax cut,” but based on the projections, some of Americans will end up paying more to the Treasury due to the elimination of the personal exemptions and cap the state and local taxes to $10,000. Below is a summary of the tax bill changes top personal taxes:

– The Bill Lowers most individual income tax rates, including the top marginal rate from 39.6 percent to 37 percent. Retains the current seven-bracket structure, but bracket widths are modified.

– Eliminates the personal exemption. – Increases the standard deduction to $12,000 for single filers, $18,000 for heads of household, and $24,000 for joint filers in 2018 (compared to $6,500, $9,550, and $13,000 respectively under current law).

– Retains the charitable contribution deduction, and limits the mortgage interest deduction to the first $750,000 in principal value. Limits the state and local tax deduction to a combined $10,000 for income, sales, and property taxes. Taxes paid or accrued in carrying on a trade or business are not limited.

– Limits or eliminates a number of other deductions. – Expands the child tax credit from $1,000 to $2,000, while increasing the phaseout from $110,000 in current law to $400,000 married couples. The first $1,400 would be refundable.

– Effectively repeals the individual mandate penalty, by lowering the penalty amount to $0, effective

January 1, 2019. – Raises the exemption on the alternative minimum tax from $86,200 to $109,400 for married filers, and increases the phaseout threshold to $1 million.

– 529 Saving plan distribution can pay for the private school tuition. – The majority of individual income tax changes would be temporary, expiring on December 31, 2025. Several, such as the adoption of chained CPI and functional repeal of the individual mandate, would be permanent.

Hope this helps! Should you have any additional questions, feel free to contact our office.

Nancy Hui, CPA

Download a PDF Version of this report

Included is a report titled Changes to the Individual Income Tax for 2018 that will prove invaluable.

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