Late in December 2017, new tax legislation was put into effect that will change the taxes for millions of Americans. Who are the winners and losers? Let’s take a look.
Winners and Losers
Here’s our view of who benefits, and who doesn’t, under the new bill. It’s always a bit more complicated than this, but it should give you an idea who is impacted.
- Taxpayers who either do not itemize their deductions such as mortgage interest and state and local taxes (and take the current standard deduction), or taxpayers who do itemize but have less total itemized deductions and personal exemptions than the new, higher standard deduction.
- Families with children under the age of 18 which will see a higher child tax credit and higher income limits before the credit is phased out.
- Those with children enrolled in private schools can begin to benefit from utilizing Section 529 plans, currently only allowed for qualified higher education expenses.
- Those without healthcare will no longer be subject to the penalty of the shared responsibility payment due with the filing of their tax returns.
- Single taxpayers earning more than $500,000 ($600,000 for married filing jointly) will have a lower top rate of 37% vs. the previous top rate of 39.6%.
- Taxpayers with business income from a sole proprietorship, partnership or S corporation will be able to deduct 20% of their business income, subject to certain limits.
- Many taxpayers will lose due to the elimination of the $4,050 personal exemption for themselves and dependents if they do not benefit from the higher standard deduction and/or higher child tax credit.
- Taxpayers who have more than $10,000 in state income tax and local property taxes, and who do not benefit by the higher standard deduction.
- Families with children, generally older than 17 years of age, due to the loss of personal exemptions.
- Taxpayers who currently pay interest on a home equity line of credit, as this deduction has been eliminated.
- Taxpayers who had considered buying a new home with a mortgage in excess of $750,000, as the deductible interest is limited to mortgage indebtedness below $750,000.
- Taxpayers who itemized deductions and also had “Miscellaneous Itemized Deductions” (typically investment management fees, unreimbursed employee expenses, union dues and tax preparation fees). This deduction has been eliminated under the current law.