The Tax Cuts and Jobs Act of 2017 (TCJA) may not mean reduced taxes for every taxpayer, but it figures prominently for the American population as a whole.
According to TaxAct.com and other sources, the tax rates of past years are gone. Almost every tax rate and bracket for each filing status have been changed. Except for the 10% and 35% tax rates, tax changes modified most bracket rates from 1 to 4 percentage points.
The standard deduction has been increased for every filing status. Now it’s $12,000 for a single person, $24,000 for married couples filing jointly and the surviving spouse, $12,000 for married couples filing separately, and $18,000 for the head of a household.
However, the higher standard deductions mean that fewer people can itemize deductions. This change has its pros and cons, as new limits on certain itemized deductions indicate some taxpayers will lose substantial amounts they could have deducted in the past.
Depending on how many people live in the household, the increase of the standard deduction may or may not be sufficient to offset the loss of the personal exemption. Also, under the new reforms, no longer can the taxpayer claim the $4,050 personal exemption for each dependent.
Gone too are miscellaneous itemized deductions that exceed 2% of adjusted gross income (AGI). Among these deductions are unreimbursed employee expenses, safe deposit fees, investment management fees, and union dues.
Also, when previously there was no cap on state and local income taxes, now those expenses are limited to $10,000.
Meanwhile, the Child Tax Credit increases from $1,000 to $2,000, plus a new $500 credit applies for non-child dependents.
With the repeal of the Affordable Care Act’s mandate, no longer does a person choosing to forego health care coverage in 2019 pay tax penalties.
As for the mortgage interest deduction, filers who purchased a home in 2018 can deduct interest up to $750,000 in mortgage debt instead of the previous $1 million.
Also, no longer is the interest on a home-equity loan deductible.
