6 Things You Should Know About the New Federal Tax Reform

Congress passed, and the president signed into law, the most sweeping tax code reform in at least 30 years last December 2017. The stated purpose of the reform is to improve the economy with tax cuts that put more money into the hands of consumers and businesses spending in the private sector. Here’s what you need to know about how it may affect your taxes.

1) The brackets have been reconfigured. There are still seven brackets of percentages that an individual would have to pay on taxable income per year; however, all but one of the percentages have been changed. The new brackets are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Please see this chart for more information. The threshold amounts of taxable income have also been changed, including a higher percentage rate for single filers earning above $200,000 who will now be paying 35% rather than 33%.

2) The alternative minimum tax exemption has been increased. Instead of $84,500 for married couples filing jointly, the new minimum will be $109,400. For single filers, it has increased from $54,300 to $70,300. Overall, fewer taxpayers will be subject to the AMT.

3) The standard deduction is doubled. If you are tired of itemizing deductions, you are in luck because the standard deduction has been doubled, meaning you’ll have fewer deductions to itemize. Single filers’ deductions will increase from $6,350 to $12,000 and married couples filing jointly will rise from $12,700 to $24,000.  

4) The child tax credit has been doubled. The tax credit per child has been doubled from $1,000 to $2,000. The refundable amount has been increased by $300 to $1,400. A non-refundable $500 credit for dependents other than children has been added and the overall threshold of income at which the benefits are phased out has been raised significantly from $110,000 to $400,000.

5) Deductions of mortgages and state/local taxes have been limited. These taxes are no longer fully deductible as the new law sets a cap on the amount that can be deducted at $10,000. For purchases of new homes, there is a new cap of $750,000 on the amount of indebtedness from which interest payments can be deducted which represents a reduction of $250,000 from the prior $1,000,000 cap.   

6) Small businesses and the self-employed will see a lot of changes. Perhaps the most significant reform for small businesses and the self-employed is the new allowance for a 20% deduction of income from “pass-through” entities such as sole proprietorships, S-corporations, and partnerships. There are also new limits on deducting interest from borrowing and an increase on the amount that can be expensed from $510,000 to $1,000,000. The new law also reduces the corporate tax rate to 21% and eliminates the corporate alternative minimum tax.  

The good news is that the attorneys at Weisberg Kainen Mark have been poring over the new law in preparation for advising clients on the legal implications for 2018 and beyond. So, if you have questions or concerns about the new tax law, your first call should be to any one of us here at WKM. Contact our award-winning legal team at (305) 374-5544 today!

Written by Weisberg Kainen Mark, PL

Weisberg Kainen Mark, PL

Weisberg Kainen Mark, PL is a Miami-based law firm focused on providing comprehensive legal support to individuals and corporate entities caught up in tax controversies or charged with a criminal act. As experienced trial lawyers with a passion for justice, our firm provides clients with compelling advocacy, attorney availability, and creative solutions to your tax or criminal law matters.