The Tax Cuts and Jobs Act (H.R. 1) overhauls America’s tax code to deliver tax relief for workers, families, and job creators. By lowering taxes across the board and modernizing our international tax system, the Tax Cuts and Jobs Act will help create jobs, increase paychecks, and make the tax code simpler for Americans of all walks of life.
For Individuals and Families, the Tax Cuts and Jobs Act:
- Lowers individual taxes and sets the rates at 0%, 10%, 12%, 22%, 24%. 32%, 35%, and 37%.
- Significantly increases the standard deduction to protect roughly double the amount of what you earn each year from taxes – from $6,500 and $13,000 under current law to $12,000 and $24,000 for individuals and married couples, respectively.
- Continues to allow people to write off the cost of state and local taxes – up to $10,000. Gives individuals and families the ability to deduct property taxes and income – or sales – taxes to best fit their unique circumstances.
- Takes action to support more American families by:
- Expanding the Child Tax Credit from $1,000 to $2,000 for single filers and married couples to help parents with the cost of raising children. The tax credit is fully refundable up to $1,400 and begins to phase –out for families making over $400,000. Parents must provide a child’s valid Social Security Number in order to receive this credit.
- Preserving the Child and Dependent Care Tax Credit to help families care for their children and older dependents such as a disabled grandparent who may need additional support.
- Preserving the Adoption Tax Credit so parents can continue to receive additional tax relief as they open their hearts and homes to an adopted child.
- Preserves the mortgage interest deduction – providing tax relief to current and aspiring homeowners.
- For all homeowners with existing mortgages that were taken out to buy a home, there will be no change to the current mortgage interest deduction.
- For homeowners with new mortgages on a first or second home, the home mortgage interest deduction will be available up to $750,000.
- Provides relief for Americans with expensive medical bills by expanding the medical expense deduction for 2017 and 2018 for medical expenses exceeding 7..5 percent of adjusted gross income, and rising to 10 percent beginning in 2019.
- Continues and expands the deduction for charitable contributions so people can continue to donate to their local church, charity, or community organization.
- Eliminates the Affordable Care Act’s individual mandate penalty tax – providing families with much-needed relief and flexibility to buy healthcare that’s right for them if the choose.
- Maintains the Earned Income Tax Credit to provide important tax relief for low-income Americans working to build better lives for themselves.
- Improves savings vehicles for education by allowing families to use 529 accounts to save for elementary, secondary and higher education.
- Provides support for graduate students by continuing to exempt the value of reduced tuition from taxes.
- Retains popular retirement savings options such as 401(k) and Individual Retirement Accounts (IRAs) so Americans can continue to save for their future.
- Increase the exemption amount from the Alternative Minimum Tax (AMT) to reduce the complexity and tax burden for millions of Americans.
This summary has been provided by the House and Senate Conference Committee and does not reflect any views or opinions of Financial Directions LLC.