Major changes to the US tax code for both individuals and businesses have passed. Here is a quick summary of the tax eliminations or reductions in deductions.
Increase in standard deduction:
The new tax law nearly doubles the standard deduction amount. More on the standard deduction in a separate post.
Child Tax Credit:
For families with children the Child Tax Credit is doubled from $1,000 per child to $2,000. In addition, the amount that is refundable grows from $1,100 to $1,400. The bill also adds a new, non-refundable credit of $500 for dependents other than children.
Personal and dependent exemptions:
The bill eliminates the personal and dependent exemptions which are currently $4,050 for 2017.
State and local taxes:
The bill limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes have generally been fully tax deductible.
The bill caps the amount of mortgage indebtedness on new home purchases on which interest can be deducted at $750,000 down from $1,000,000 in current law.
The bill eliminates the tax penalty for not having health insurance after December 31, 2018. It also temporarily lowers the floor above which out-of-pocket medical expenses can be deducted from the current law floor of 10% to 7.5% for 2017 and 2018.
So for 2017 and 2018, you can deduct medical expenses that are more than 7.5% of your adjusted gross income as opposed to the higher 10%.
Self-employed and small businesses:
The bill has a a lot of changes for businesses. I will probably break this down in separate post but here are some of the major highlights.The biggest changes includes:
- a reduction in the top corporate rate to 21%;
- a new 20% deduction for incomes from certain type of “pass-through” entities. For more information Click Here
- limits on expensing of interest from borrowing;
- almost doubling of the amount small businesses can expense from the 2017 Section 179 amount of $510,000 to $1,000,000; and
- eliminates the corporate alternative minimum tax (AMT).