As many of you may know, on December 22nd of 2017, President Trump signed off on a new tax reform bill. This new act changes income tax levels, corporate tax rates, and many other rates so chances are the plan will affect you. The plan will come into effect in 2018, here are some of the major changes that will come from this plan.
The act keeps the seven income tax brackets intact, but it lowers the income tax rates. While the standard deduction has virtually doubled. Previously, the standard deduction was $6,350 for single filers, that number has increased to $12,000, and for married couples, the deduction has increased from $12,700 to $24,000! The act will eliminate personal exemptions. Presently, you are able to claim a $4,050 exemption for you and dependents, under the new act you will no longer be able to claim exemptions. Families with many children will now have higher taxes due to the reform.
There are still deductions available for things like donations, retirement, and student loans. Though the deductions on mortgage interest is limited to the first $750,000 of the loan. The state and local tax deduction will now have a cap at $10,000 where it was previously unlimited filing. The act will repeal the Obamacare Tax on individuals without health insurance. The act also doubles the estate tax exemption. The new act increases the Child Tax Credit from $1,000 to $2,000
The Act lowers the maximum corporate tax rate from 35% to 21% which will be the lowest corporate tax rate since 1939. The Act limits corporations’ ability to deduct interest expense to 30% of income.
The new Tax Plan will take effect in 2018, so your 2017 taxes will remain the same. While individual changes are set to expire in 2025, and corporate changes are permanent, this is subject to change. These are only a few of the highlighted areas that this plan will have an effect on, contact Andrew Kyriacou for more information and tax help regarding this new plan. Andrew Kyriacou can help you plan for the new system!