Congress finalized the Tax Cuts and Jobs Act tax reform bill. The bill is due to go to the floor for a vote by the House and Senate early next week.
The Tax Cuts and Jobs Act tax reform bill is expected to cut taxes for individuals and businesses and simplify the tax code by increasing some tax deductions, lowering individual tax rates, and getting rid of some tax provisions. It is important to note that for the vast majority of taxpayers, the Tax Cuts and Jobs Act does not impact the 2017 taxes that you will be filing soon (the ones you file in 2018), and Intuit® ProConnect™ professional tax software is up to date with the latest tax laws so you can file with confidence.
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 continue to check back with the ProConnect Tax Reform Resource Center for up-to-date information. We are closely monitoring progress and will give you important updates as they occur.