There's a ton of new an interesting stuff inside the new Tax Cuts and Jobs Act signed into law by President Trump last week for tax years 2018 and beyond. Here are a few highlights:
- Increased standard deduction. The new standard deductions are nearly double, increasing from $6,500 to $12,000 for individuals, and $13,000 to $24,000 for married filing jointly.
- Lower tax rates. The highest bracket not only drops from 39.6% to 37%, but also starts a higher income levels (among other changes to the rest of the brackets).
- Expanded use of 529s. In my recent posts on 529s, I've provided some detail on how to use the college savings vehicles, and now the 529 can also be used for private K-12 tuition expenses (up to $10,000/yr.).
- Home equity loans are no longer deductible. So, you may want to expedite your paydown of your home equity line of credit.
- State and local taxes capped at $10,000. Previously, state and local taxes were fully deductible.
- Increased Child Tax Credit. The new benefit is up to $2,000 per child (double the prior benefit). See a detailed analysis here.
- Medical expense deductions remain. This deduction is particularly complex, only allowing deductions on the portion of your medical expenses that exceed 7.5% (a new lower floor) of your adjusted gross income. In this particular example, they retroactively applied the new, lower floor to 2017 taxes as well.
There's plenty more to come as we study up on all the changes.