Friday March 23, 2018
Senate Tax Cuts and Jobs Act
The Senate Finance Committee release summarized the main provisions of their comprehensive tax bill.
- Tax Rates - There are seven brackets ranging from 0% to 38.5%. The top rate applies to taxpayers with income over $500,000 for single filers and $1 million for married couples. A goal of the bill is to provide tax relief for middle-income taxpayers.
- Standard Deduction - The standard deduction is nearly doubled to $12,000 for single filers and $24,000 for married couples. With this larger standard deduction, an estimated nine out of ten taxpayers will not itemize and may use a postcard tax return.
- Family Provisions - In an effort to help families, the Child Tax Credit is increased to $1,650. The Dependent Care Tax Credit and Adoption Tax Credit are both retained.
- Charitable Contributions - The permitted deduction for most donors increases from the prior amount of 50% of adjusted gross income to 60%.
- Mortgage Interest - A taxpayer may deduct mortgage interest on a primary residence with loans valued up to $1 million.
- Medical Deductions - If a taxpayer itemizes, he or she may continue to deduct qualified medical expenses.
- Retirement Plans - The existing rules for IRAs, 401(k) plans, 403(b) plans and other types of retirement plans are maintained.
- Earned Income Tax Credit (EITC) - The tax credit for lower-income persons is continued.
- Alternative Minimum Tax (AMT) - The AMT is repealed.
- Estate Tax - The bill doubles the exemption to $10 million plus indexed increases. A couple in 2018 could have a basic exclusion amount of $21.96 million.