The Tax Cuts and Jobs Act signed into law on December 22, 2017, is the most extensive overhaul of the U.S. tax system in more than 30 years. The new law contains several important considerations for individual investors and business owners to keep in mind moving forward.
Key points to note include:
- For individuals, the new law provides the same number of tax brackets but with lower rates and different income thresholds.
- Tax rates for trusts and estates have decreased to only four brackets: 10%, 24%, 35%, and 37%.
- The deduction for state and local taxes is now capped at $10,000 for the sum of state and local property taxes and income taxes (or sales tax in lieu of income tax).
- The mortgage interest deduction is eliminated for interest paid on home equity debt. This is debt used for something other than to buy, build, or improve your home.
- The standard deduction nearly doubled and is now $12,000 for single filers and $24,000 for married filers.
- Cash contributions to charitable organizations may now offset up to 60% of your adjusted gross income, up from 50% previously.
- Deductions for investment expenses, tax preparation fees, and unreimbursed employee expenses are eliminated.
- The phaseout of itemized deductions for higher-income taxpayers is eliminated.
Learn more from our visual guide to the new income tax rates.