Tax reform is a hot topic in the United States right now, and it’s important to stay informed about the changes that are coming. With the new tax year just around the corner, here’s what you need to know about the upcoming tax reform.
First, the Tax Cuts and Jobs Act of 2017 (TCJA) is the most significant tax reform in decades. It was signed into law in December 2017 and is set to take effect in 2018. The TCJA makes sweeping changes to the tax code, including reducing individual and corporate tax rates, increasing the standard deduction, and eliminating or limiting certain deductions.
The most significant change for individuals is the reduction in tax rates. The new tax brackets are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The top rate of 37% applies to taxable income over $500,000 for single filers and $600,000 for married couples filing jointly.
The standard deduction has also been increased. For 2018, the standard deduction is $12,000 for single filers and $24,000 for married couples filing jointly. This means that more of your income will be taxed at the lower rates.
The TCJA also eliminates or limits certain deductions. For example, the deduction for state and local taxes (SALT) is now limited to $10,000. This means that if you pay more than $10,000 in state and local taxes, you won’t be able to deduct the full amount. Additionally, the mortgage interest deduction is now limited to loans of $750,000 or less.
Finally, the TCJA also includes changes to the tax treatment of certain investments. For example, the new law eliminates the deduction for miscellaneous itemized deductions, such as investment expenses. It also limits the deduction for qualified business income to 20%.
Overall, the TCJA is a major overhaul of the tax code. It’s important to stay informed about the changes and how they will affect you. If you have any questions, be sure to consult a tax professional.