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