US Tax Changes

By Wendy, January 20th, 2018in US Tax

Individual Tax rates

The individual income tax rates and brackets have been modified for Tax years 2018 until 2025. The new tax rates are outlined below:

Single Filers 2018

Under Previous Law

Tax Cuts and Jobs Act

Tax Rate

Income Bracket

Tax Rate

Income Bracket

 

10%

 

$0-$9,525

 

 

10%

 

$0-$9,525

 

 

15%

 

 

$9,525 - $38,700

 

12%

 

$9,525 - $38,700

 

25%

 

 

$38,700 - $93,700

 

22%

 

$38,700 - $82,500

 

28%

 

 

$93,700 - $195,450

 

24%

 

$82,500 - $157,500

 

33%

 

 

$195,450 - $424,950

 

32%

 

$157,500 - $200,00

 

35%

 

 

$424,950 - $426,700

 

35%

 

$200,000 - $500,000

 

39.6%

 

 

$426,700 and up

 

37%

 

$500,000 and up

 

Married Filing Jointly 2018

Under Previous Law

Tax Cuts and Jobs Act

Tax Rate

Income Bracket

Tax Rate

Income Bracket

 

10%

 

$0-$19,025

 

 

10%

 

$0-$19,050

 

 

15%

 

 

$19,050 - $77,400

 

12%

 

$19,050- $77,400

 

25%

 

 

$77,400 - $156,150

 

22%

 

$77,400 - $165,000

 

28%

 

 

$156,150 - $237,950

 

24%

 

$165,000 - $315,000

 

33%

 

 

$237,950 - $424,950

 

32%

 

$315,000 - $400,00

 

35%

 

 

$424,950 - $480,050

 

35%

 

$400,000 - $600,000

 

39.6%

 

 

$480,050 and up

 

37%

 

$600,000 and up

 

Married Filing Separately 2018

Under Previous Law

Tax Cuts and Jobs Act

Tax Rate

Income Bracket

Tax Rate

Income Bracket

 

10%

 

$0-$9,325

 

 

10%

 

$0-$9,525

 

 

15%

 

 

$9,325- $37,950

 

12%

 

$9,525 - $38,700

 

25%

 

 

$37,951- $76,550

 

22%

 

$38,700 - $82,500

 

28%

 

 

$76,551 - $116,675

 

24%

 

$82,500 - $157,500

 

33%

 

 

$116,676- $208,350

 

32%

 

$157,500 - $200,00

 

35%

 

 

$208,351 - $235,350

 

35%

 

$200,000 - $300,000

 

39.6%

 

 

$235,351 and up

 

37%

 

$300,000 and up

 

Head of Household 2018

Under Previous Law

Tax Cuts and Jobs Act

Tax Rate

Income Bracket

Tax Rate

Income Bracket

 

10%

 

$0-$13,350

 

 

10%

 

$0-$13,600

 

 

15%

 

 

$13,350 - $50,800

 

12%

 

$13,600- $51,800

 

25%

 

 

$50,800 - $131,200

 

22%

 

$51,800 - $82,500

 

28%

 

 

$131,200 - $212,500

 

24%

 

$82,500 - $157,500

 

33%

 

 

$212,500 - $416,700

 

32%

 

$157,500 - $200,00

 

35%

 

 

$416,700- $444,500

 

35%

 

$200,000 - $500,000

 

39.6%

 

 

$444,500 and up

 

37%

 

$500,000 and up

 

 

 

Personal exemptions and Standard Deduction

Personal exemptions will no longer be available from 2018 through 2025. However, the standard deduction has risen significantly:

Tax filing status

2017 Standard Deduction

2018 Standard Deduction

 

Single

 

 

$6,350

 

$12,000

 

Married Filing Jointly

 

 

$12,700

 

$24,000

 

Married Filing Separately

 

 

$6,350

 

$12,000

 

Head of Household

 

 

$9,350

 

$18,000

 

 

 

Itemized Deductions

This area has seen some of the most major changes given the increase in the standard deduction. These include (but not limited to) the following:

State & Local taxes

The deduction for state & local income tax, sales tax and property tax (‘SALT’ deduction) will be capped to $10,000. This limit applies to both single and married filers but is reduced to $5,000 if married filing separately. This cap applies to personal state and local property taxes, and state and local income taxes (or sales taxes in lieu of income taxes).

Mortgage interest

For mortgages incurred after 31st December 2017 but before 1st January 2026, you can deduct interest on up to $750,000 of principal (down from the $1 million limit) on newly purchased homes (& second homes). In addition, you can no longer to deduct home equity interest until 2026 unless the money is used for home improvements.

Medical expenses

The threshold for this deduction has been lowered from 10% of adjusted gross income (AGI) to 7.5% but only for 2017 (retroactively) and 2018. From 2019, the threshold will go back to 10% of AGI. 

Charitable donations

Charitable cash donations made to U.S. public charities may be deducted up to 60% of AGI; however, you can carry forward up to five years any amount that exceeds this limit.

Casualty losses

These will only be deductible if incurred in a federally declared disaster. 

Other miscellaneous deductions

Many miscellaneous deductions subject to the 2% AGI limitation have been repealed from 2018 until 2026. These include (but not limited to) the following: 

  • Investment fees & expenses
  • unreimbursed employee expenses,
  • job expenses
  • tax preparation fees
  • union fees & professional dues
  • license & regulatory fees

 

 

 

Other deductions

Moving expenses

Employment related moving expenses will no longer be deductible unless it relates to certain moves by military personnel.

Alimony & separate maintenance payments

These payments are no longer deductible for new divorce and separation agreements entered & signed after 31st December 2018. In addition, alimony income will no longer be taxable to the recipient from 1st January 2019.

 

 

 

Alternative Minimum Tax (AMT)

AMT has not been repealed from the Tax act; but changes have been made to the exemption & phaseout limits from 2018 through to 2025 as follows:

 

Under Previous Law

Tax Cuts and Jobs Act

Alternative Minimum Tax (AMT) – Exemptions

 

Single filers - $54,300


Married filing jointly - $84,500


Married filing separately - $42,250


Heads of Households - $54,300

 

Single filers - $70,300


Married filing jointly - $109,400


Married filing separately - $54,700


Heads of Households - $70,300

Alternative Minimum Tax (AMT) – Phase-Outs

 

Single filers - $120,700


Married filing jointly - $160,900

 

Married filing separately - $80,450

 

Heads of Households - $120,700

 

 

Single filers - $500,000


Married filing jointly - $1,000,000


Married filing separately - $500,000


Heads of Households - $500,000

 

 

 

Child Tax Credit

The child tax credit is expanded to $2,000 per qualifying child with phaseout thresholds of $400,000 (married filing jointly) and $200,000 (others).  There will also be a $500 nonrefundable credit for a dependent who is not a qualifying child.  The additional child tax credit, which is refundable is limited to $1,400 per child whose income does not exceed $2,500.

 

 

Contact Us: There have been many changes implemented under the new Tax act and if you have any queries on how these changes or any others may impact your U.S. tax filings, please feel free to contact us.

 

 

Disclaimer: This article is a summary of some of the key parts of the Tax Cuts & Jobs Act 2017 in relation to individuals and there are many parts of the act that have not been mentioned. This article is intended for general information only; therefore, no responsibility will be taken by PJD Tax Consultants Ltd on any actions taken by yourself based on any of the information above. 

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