How Will the New Tax Bill Impact You?
The Tax Cut and Jobs Act of 2017 has been sent to President Trump to sign into law. This will be the largest overhaul of the U.S. Tax code in the past thirty years. According to the nonpartisan Tax Policy Center, this tax bill will reduce taxes on average for all income groups.
Our team of advisors here at Cornerstone have been closely watching and analyzing the tax bill and have compiled a short list of the tax amendments that will most likely impact you. Those changes are as follows for the new tax bill:
- Lowers individual tax rates. For example, the top tax rate drops from 39.6% to 37%, which will begin at $500,000 of taxable income, up from $426,700 for single filers, and $600,000, up from the current $480,050 for joint filers
- Increases the standard deduction from $6,350 to $12,000 for single filers, and from $12,700 to $24,000 for joint filers
- Eliminates the personal exemption
- Doubles the child tax credit to $2,000
- Eliminates most 2% miscellaneous expenses such as tax preparation & moving expenses
- Caps the state and local income, sales & property tax deduction at $10,000
- Reduces the home mortgage interest deduction to $750,000, down from $1,000,000, for loans taken after December 15, 2017
- Eliminates the tax deduction on interest on home equity loans
- Increases the deductibility of out-of-pocket medical expenses from 10% of adjusted gross income down to 7.5%
- Eliminates the ability to re-characterization a Roth back to an IRA, which applies to Roth conversions made after December 31, 2017
- Doubles the estate tax exemption to $11.2M for individuals and $22.4M for couples
From our advisory team’s perspective, the tax savings really won’t amount to much unless you expect your yearly taxable income to exceed $100,000. Regardless, we encourage you to reach out to your financial advisor or your tax professional to clarify any specific questions that you may have.
As to 2017, it’s not too late to make some smart moves now, to reduce your taxes for this year, as well to be tax smart as you look toward the future. We have created a series of short videos that we call, End of Year Tax Planning Tips. To access them, visit our Facebook page (Cornerstone - Comprehensive Wealth Management).