If you've been following the news out of Washington, you probably know that tax reform is a real possibility. Here are some of the tax provisions on the table for final passage:
Changes for Individuals and Families Effective for Tax Year 2018
Lower tax rates – Lowers tax rates and sets the rates at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The current tax rates are: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.
Child Tax Credit – Increases in the Child Tax Credit to $2,000 from $1,000 and expands the refundable tax portion of the Child Tax Credit from $1,100 to $1,400.
Standard deduction – Almost doubles the standard deduction (from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples), lowering taxable income for those who claim the standard deduction.
Alternative Minimum Tax – Increases the exemption amount from the Alternative Minimum Tax.
Personal exemptions – Eliminates the personal and dependent exemptions per taxpayer and dependent, which is presently $4,150 each.
Eliminates the individual mandate penalty – Eliminates the penalty for individuals failing to maintain minimum essential health care coverage.
Earned Income Tax Credit – Maintains the Earned Income Tax Credit for low to middle-income wage earners which can be up to over $6,000 credit for a family with three kids.
Changes to State and Local Sales Tax and Mortgage Interest Rate
State income tax, sales and local tax deduction, and property taxes – Taxpayers who are able to itemize their tax deductions can choose to deduct the state income tax deduction, sales and local tax deduction (up to $10,000), or the property tax deduction.
Mortgage interest – Homeowners with a new mortgage on a first or second home can deduct home mortgage interest based on home mortgage acquisition indebtedness of up to $750,000 instead of $1,000,000 per previous years.
The Tax Cut and Jobs Act also lowers the corporate tax rate to 21% effective January 1, 2018.
At this point, no one knows the exact day of passage, but we are closely monitoring progress and will give you important updates as they occur.