Congress passed a milestone tax reform bill last month and below is some of the most pertinent information. These reforms are helping both individual tax payers and corporations, and you will probably see an increase in your paycheck starting in February! The next question is do you save it, spend it, or invest it?
• Personal Tax Brackets – generally lower 3-5% lower overall tax rates if you make under $400K (married) or $200K (single). For those making over $500K, your rate drops as well, but in the 2% range.
• Standard Deduction and Exemptions – tax filing is simplified for many – If you don’t have mortgage interest, charitable contributions, state taxes, and medical expenses (plus a few others) in excess of $12K (single) and $24K (married), you can file a simplified tax form.
• State and Local Tax Deduction – limited deduction to 10K for items such as property tax, sales tax, etc., which may affect tax payers with multiple properties or big ticket expenditures (like a car)
• Estate Tax – raises the threshold where this would “kick in” – if your estate is under apx. $11M single/22M married, you need not worry about estate taxes.
• Corporate Tax Savings – Dropped for C-Corporations, which are generally the larger organizations. Expect foreign assets to flow back into the US based on some of the repatriation changes, another potential positive. For many small but expanding businesses, additional deduction are granted under Section 179 (increased to $1 million).
• 529 College Savings Plans – can use funds for expenses from Kindergarten onward, not just for college expenses.
• Charitable Deduction – expanded so you can retain a large deduction for large contribution regardless of your income level.
• Home Equity Line Deduction – No longer considered deductible. You lose the ability to deduct this interest, therefore it may be wise to re-look at your overall debt situation.