The following is a summary of individual tax changes effective in 2018:

  • The new brackets under the tax act are:  10%, 12%, 22%, 24%, 32%, 35% and 37%.
  • The deduction for personal exemptions has been suspended for years 2018 through 2025.
  • The standard deduction was increased as follows:
    • $24,000 married filing joint or a surviving spouse
    • $18,000 for head of household
    • $12,000 for single
  • The Act retains the additional standard deduction for the blind and elderly that was available under the old law.  The standard deduction will also be indexed for inflation for years beginning after 2018.
  • The Alternative Minimum Tax (AMT) was not eliminated but the exemption amounts were increased:
    • $109,400 for married filing joint or surviving spouse
    • $70,300 for single taxpayers
    • $54,700 for married filing separately
  • The phase out of the alternative minimum tax exemption amounts was also increased to $1,000,000 for married filing joint or surviving spouse and $500,000 for single and married filing separately.
  • The Act suspends all miscellaneous itemized deductions that are subject to the 2% floor, including the following:
    • Unreimbursed employee expenses
    • Tax preparation fees
    • Hobby expenses
    • Union dues
    • Work clothes and uniforms
    • Dues to professional organizations
    • Investment fees/expenses
    • Legal fees related to producing income
    • Safe deposit fees
    • Certain educational expenses
    • Reduction for repayment of amounts under claim of right of $3,000 or less
  • Qualified moving expense reimbursements are no longer excluded from income. The exclusion is still available for active duty members of the armed forces who move pursuant to a military order and incident to a permanent change of station.
  • Moving expenses incurred in connection with starting a new job are no longer deductible.
  • Mortgage interest deduction has been reduced to interest on $750,000 of acquisition indebtedness for debt incurred after December 15, 2017. The $1 million remains for older debt.  The deduction is for combined debt of principal residence and second home.  The act suspends the deduction for mortgage interest on a home equity loan unless it is used to purchase, build, or improve the property that secures the home equity loan.
  • State and local taxes and real estate taxes – This deduction is now limited to a combined total of $10,000.
  • The above the line deduction for alimony payments has been eliminated.  The individual receiving the alimony payments does not have to include them in income.  This applies for divorce decrees, separation agreements and certain modifications entered into after 2018. For pre-2019 alimony payments to be tax deductible, payers must satisfy a list of specific requirements. If these requirements are met, alimony payments can be written off “above-the-line” on the payer’s federal income tax return.
  • The AGI limitation on cash contributions has increased from 50% to 60%.
  • The itemized deduction for personal casualty loss is now only applicable to losses incurred as a result of federally-declared disasters.
  • The child tax credit is increased to $2,000 subject to gross income limitations. The maximum refundable credit per eligible child is $1,400.

PLEASE NOTE: A group of Senate Democrats recently introduced Senate bill S. 2718 “Tax Fairness for Workers Act” which attempts to amend the Internal Revenue Code of 1986 to allow workers to take an above-the-line deduction for union dues and expenses and to allow a miscellaneous itemized deduction for all other unreimbursed expenses incurred in the trade or business of being an employee that were recently suspended by the new tax act.  The Bill is dated April 19, 2018.

As always, we will communicate further updates to you as they become available.