Tax Law and News Tax Reform 101 for Families Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Mike D'Avolio, CPA, JD Modified Mar 23, 2018 3 min read The Tax Cuts and Jobs Act is the largest piece of tax reform legislation in 30 years and was signed into law on Dec. 22, 2017. For most taxpayers, these tax changes impact tax year 2018 and not tax year 2017. Overall, the changes associated with this act will lower taxes for individuals and small businesses. The following infographic provides a glimpse at the impact for a typical family of four before and after the tax changes are applied. This is a mock scenario for you to review and share with your clients, whose results may differ. Highlights of Changes Applicable to Families Lower Tax Rates There are seven tax rates under the new law: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Here is the tax rate schedule for joint filers: Standard Deduction Increased The standard deduction for taxpayers not itemizing deductions on Schedule A is increased to $24,000 married filing joint, $18,000 head of household and $12,000 for other filing statuses. For taxpayers who are itemizing deductions, there is no longer a phase-out for high-income earners. Personal Exemption Repealed Under prior law, the personal exemption was $4,050. This exemption has been repealed under the Tax Cuts and Jobs Act. Child Tax Credit The child tax credit for children under 17 years old is doubled from $1,000 to $2,000, and $1,400 of the credit is refundable and applies when there is no tax liability. The income levels when the credit phases out are increased to $400,000 for joint filers and $200,000 for others. A $500 non-refundable credit is available for dependents who are not your children. A Social Security number for the child is now required to receive the credit. State and Local Tax Deduction The itemized deduction claimed on Schedule A for state and local taxes is now limited to $10,000 ($5,000 for married filing separately) on the aggregate of the following items: (no limit under prior law): State and local property taxes State and local income taxes OR sales taxes Mortgage and Home Equity Debt The itemized deduction claimed on Schedule A for mortgage interest is now limited to underlying debt of up to $750,000 ($375,000 for married filing separately). The prior limit of $1 million continues to apply for 1) debt incurred on or before Dec. 15, 2017, and 2) refinancing existing debt that was incurred before Dec. 31, 2017. There is no longer a deduction for interest on home equity debt. Tax Deductions That Are Going Away Moving expenses (the exclusion for reimbursements also goes away), except for members of the Armed Forces on active duty. Miscellaneous itemized deductions subject to the 2 percent income limit, such as job expenses and investment expenses. Personal casualty and theft losses, unless they were incurred in a federally declared disaster. Alimony For divorce or separation agreements executed after Dec. 31, 2018, alimony and separate maintenance payments are not deductible by the payer and not included in income of the recipient. This was not the case under prior law. Affordable Care Act Mandate Individuals who are not covered by insurance or an exemption will no longer have to pay a penalty beginning in 2019. Access the latest information about tax reform, including a new set of live webinars covering a variety of related topics, at the Intuit® ProConnect™ Tax Reform Resource Center. Previous Post IRS Releases More Details About Latest Taxpayer Scam Next Post TaxProTalk, Episode 8 Written by Mike D'Avolio, CPA, JD Mike D’Avolio, CPA, JD, is a tax law specialist for Intuit® ProConnect™ Group, where he has worked since 1987. He monitors legislative and regulatory activity, serves as a government liaison, circulates information to employees and customers, analyzes and tests software, trains employees and customers, and serves as a public relations representative. More from Mike D'Avolio, CPA, JD Comments are closed. Browse Related Articles Tax Law and News Consultant Spotlight: John Trammell Practice Management Why you should care about green cloud computing Practice Management Consultant spotlight: Steven G. Advisory Services Understanding your client’s relationship with mon… Practice Management Consultant spotlight: Jonathan Lovitt Practice Management ProConnect™ Tax spotlight: Megan Leesley, CPA Tax Law and News Boo! Extension season horror stories Tax Law and News Tax relief for victims of Hurricane Milton Practice Management Tax Season Readiness virtual conference—Nov. 13-14 Practice Management Lacerte® Tax spotlight: Tania Santos, EA