US TAX CHANGES

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 LawTax Cuts and Jobs Act
Tax RateIncome BracketTax RateIncome Bracket
10%$0-$9,52510%$0-$9,525
15%$9,525 - $38,70012%$9,525 - $38,700
25%$38,700 - $93,70022%$38,700 - $82,500
28%$93,700 - $195,45024%$82,500 - $157,500
33%$195,450 - $424,95032%$157,500 - $200,00
35%$424,950 - $426,70035%$200,000 - $500,000

39.6%$426,700 and up37%$500,000 and up

Married Filing Jointly 2018

Under Previous LawTax Cuts and Jobs Act
Tax RateIncome BracketTax RateIncome Bracket
10%$0-$19,02510%$0-$19,050
15%$19,050 - $77,40012%$19,050- $77,400
25%$77,400 - $156,15022%$77,400 - $165,000
28%$156,150 - $237,95024%$165,000 - $315,000
33%$237,950 - $424,95032%$315,000 - $400,00
35%$424,950 - $480,05035%$400,000 - $600,000
39.6%$480,050 and up37%$600,000 and up

Married Filing Separately 2018

Under Previous LawTax Cuts and Jobs Act
Tax RateIncome BracketTax RateIncome Bracket
10%$0-$9,32510%$0-$9,525
15%$9,325- $37,95012%$9,525 - $38,700
25%$37,951- $76,55022%$38,700 - $82,500
28%$76,551 - $116,67524%$82,500 - $157,500
33%$116,676- $208,35032%$157,500 - $200,00
35%$208,351 - $235,35035%$200,000 - $300,000
39.6%$235,351 and up37%$300,000 and up

Head of Household 2018

Under Previous LawTax Cuts and Jobs Act
Tax RateIncome BracketTax RateIncome Bracket
10%$0-$13,35010%$0-$13,600
15%$13,350 - $50,80012%$13,600- $51,800
25%$50,800 - $131,20022%$51,800 - $82,500
28%$131,200 - $212,50024%$82,500 - $157,500
33%$212,500 - $416,70032%$157,500 - $200,00
35%$416,700- $444,50035%$200,000 - $500,000
39.6%$444,500 and up37%$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 status2017 Standard Deduction2018 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 LawTax Cuts and Jobs Act
Alternative Minimum Tax (AMT) – ExemptionsSingle 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-OutsSingle 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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