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Individual Income Tax
- The Act retains 7 income tax brackets, but lowers the rates starting 2018 year – Everyone benefits!
- Standard deduction doubled – Many taxpayers who are at the borderline of using itemized deduction can now choose the standard deduction instead.
2017: Single $6,350； Married filed jointly $12,700
2018: Single $12,000；Married filed jointly $24,000
2019: Single $12,200；Married filed jointly $24,400
- Child tax credit increased – Parents with minor children under the age of 17 can now receive higher child tax credit amount.
2017: $1,000 per child；single parents with annual income 75K or more and married filed jointly parents with 110K or more are not eligible
Starting 2018: $2,000 per child；income threshold now is increased to 200K for single and 400K for MFJ. No limit on number of children and the amount is refundable up to $1,400
- 529 savings plan expanded – Beginning 2018, in addition to qualified higher education expenses, 529 eligible education expenses can be used for an elementary or secondary public, private, or religious school
- Medical expenses deduction threshold lowered – A temporary adjustment
2018: medical expenses are deductible for amount exceeding 7.5% of adjusted gross income (AGI)
2019 and forward: only deductible for amount exceeding 10% AGI 2 |
- Estate and gift tax exemption doubled – Big win for the rich
2017: Exemption threshold is $5.49 million, estate over the limit is taxed at 40%
2018: $11.18 million per individual
2019: $11.40 million per individual
- Affordable Care Act repealed – The Obamacare individual mandate requires most Americans to carry a minimum level of health coverage or pay a steep tax fine for no insurance. The minimum penalty is $695/adult and $347.50/child under 18 for 2018.
Starting 2019, such penalty will be removed.
- Personal exemption eliminated – A huge disadvantage for large families. The old law provides personal exemption of $4,050 per every household member. Starting 2018, personal exemption deduction is completely eliminated, and is replaced with doubled standard deduction.
- State, local, sales, and property tax deduction limited – Starting 2018, the deduction for state and local income taxes, sales taxes, and property taxes is capped at total of $10K. This new law will impact on taxpayers with more expensive property and who live in states with higher state tax rates.
- Mortgage interest deduction lowered – Starting 2018, the new law allows full mortgage interest deduction on loan balance of $750K and under. This provision only applies to acquisition indebtedness for a newly acquired principal or second home. Existing mortgages are grandfathered up to the previous $1 million limit. Homeowners can still deduct interest paid on a home equity line of credit or home equity loan, so long as the loan was used to buy, build or substantially improve your home, and within the $750K threshold
- Alimony payment – In 2018, the individual paying alimony can still deduct payments from their income. The person receiving the payments includes them as income. For any divorce or separation agreement signed or modified on or after Jan. 1, 2019, the person making alimony does not get to deduct them, and the recipient does not claim the payments as income