Wednesday, February 7, 2018

Tax Changes Affecting Individuals: Part I

-Kristen Murray,  Financial Services Specialist



If you were following the publicity surrounding the Tax Cuts and Jobs Act (TCJA) prior to its enactment, I expect you heard mention a time or two that it was designed to provide, amongst other things, significant tax relief to middle income earners. So, if you are an individual classified as a middle income earner you are probably asking yourself, “will I benefit”? The answer, as with most things tax related is it depends. There are several factors that require consideration before an individual can determine whether the TCJA will prove adventagous for them. Such condisderations include but are not limited to eligible credits and deductions. What follows is a chart that reviews notable changes to many popular credits and deductions. Something to note, if you generally do not itemize, you may focus your review on the areas in grey.

AGI: Adjusted Gross Income
AMT: Alternative Minimum Tax
MAGI: Modified Adjusted Gross Income

Then and Now: 2017 to 2018
Deductions and Credits
2017 Single
2017 MFJ
2018 Single
2018 MFJ
Standard Deduction
$6,350.00*
$12,700.00*
$12,000.00*
$24,000.00*
Additional Standard Deduction over 65 years of age and/or blind
$1,550.00*
$1,250.00 ea.*
$1,600.00*
$1,300.00 ea.*
Personal Exemptions
$4,050.00**
$4,050.00**
$0.00
$0.00
Itemized Deductions - Medical Expenses
Excess of 7.5% AGI (tax reform retroactive change)
Excess of 7.5% AGI (tax reform retroactive change)
Subject to 7.5% AGI Returns to 10% for 2019
Subject to 7.5% AGI *Returns to 10% for 2019
Itemized Deductions - SALT (state/local property, state/local/foreign income and general sales tax)
Allowed subject to AMT phase-out rules
Allowed subject to AMT phase-out rules
Maximum deduction of $10,000.00, foreign income tax excluded, subject to AMT phase-out rules
Maximum deduction of $10,000.00, foreign income tax excluded, subject to AMT phase-out rules
Itemized Deduction - Mortgage Interest
Interest paid on maximum acquisition indebtedness of $500,000 (including home equity) subject to AMT rules
Interest paid on maximum acquisition indebtedness of $1 million (including home equity) subject to AMT rules
Home equity interest disallowed and maximum acquisition indebtedness reduced to $375,000 for post 12/31/2017 acquisitions, subject to AMT rules
Home equity interest disallowed and maximum acquisition indebtedness reduced to $750, 000 for post 12/31/2017 acquisitions, subject to AMT rules
Itemized Deduction - Miscellaneous subject to 2% AGI
Qualifying expenses allowed
Qualifying expenses allowed
Previously qualified expenses disallowed
Previously qualified expenses disallowed
Child Tax Credit
$1000/qualifying child, subject to income phase-out beginning at MAGI of $75,000
$1000/qualifying child, subject to income phase-out beginning at MAGI of $110,000
$2000/qualifying child, subject to income phase-out beginning at MAGI of $200,000
$2000/qualifying child, subject to income phase-out beginning at MAGI of $400,000
Refundable Portion of Child Tax Credit
Refundable up to $1,000, subject to earned income and other qualifying factors
Refundable up to $1,000, subject to earned income and other qualifying factors
Refundable up to $1,400, subject to earned income and other qualifying factors
Refundable up to $1,400, subject to earned income and other qualifying factors
* Not Subject to AGI Phase Out
 ** Subject to AGI Phase Out


Stayed tuned, as next Wednesday I will review the interaction between such changes and the 2018-2025 tax tables.  It is a lot of information to take in, and (borrowing a line from my Yankee colleague Dan Shepard), “you will require a seat but only use the edge”. Exciting stuff folks!

For more information, email FinancialServices@yankeefarmcredit.com