Tax Reform Impact on Individual Taxpayers

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How Will Tax Reform Impact Individual Taxpayers?

Here are some highlights of the changes for individual taxpayers (from 2018 through 2025):

  • The top individual rate is 37%.
  • The individual Alternative Minimum Tax remains, but with increased exemption amounts and increased phase-out levels.
  • The mortgage interest deduction limit is reduced to $750,000 on new mortgages ($375,000 for a married couple filing a separate return) and only home equity loan interest on loans used for home improvements or traced to a business, investment or passive activity expenditures remains deductible (See Sec. 163(h), Regs. Sec. 1.163-8T and Notice 89-35).
  • Individuals are allowed to deduct up to $10,000 in total state and local taxes, which include income or sales taxes plus property taxes.  For state and local taxes eligible for deduction on Schedule C, E, or F, the limit does not apply.
  • The child tax credit is increased to $2,000, with up to $1,400 refundable.  The phase-out level is increased so more individuals with children under age 17 will qualify for the credit.
  • Medical expenses in excess of 7.5% of adjusted gross income (AGI) are deductible in 2017 and 2018 and then 10% of AGI thereafter.
  • There are no personal or dependent exemptions under the new tax law.
  • No moving expenses are deductible (other than for U.S. armed forces members on active duty).
  • No alimony is taxable or deductible starting in 2019 for agreements executed after 2018.
  • No miscellaneous itemized deductions.
  • No Pease phase-out of itemized deductions.

Source:  AICPA