On Friday, December 22, 2017, President Trump signed the Tax Cuts and Jobs Act, designed to lower taxes and spur economic growth. Most of these changes have already taken effect, starting on January 1, 2018. Expecting to reduce taxes for individuals and businesses, this new tax reform bill will increase standard deduction, increase child credit tax among several other adjustments.
Mortgage Interest Deduction
The limit for mortgage interest deduction dropped from $1 million in housing debt to $750,000. This is effective on homes purchased after 12/15/17. Also allows the $1 million limit for refinancing an existing loan as long as the new loan is not greater than amount refinanced.
Standard Deduction
Increasing (nearly doubling) to $12,000 for individuals and $24,000 for couples filing jointly. This increase means fewer people will have to itemize and more taxpayers will be able to take the standard deduction. The standard deduction for taxpayers with few itemized deductions will exempt twice as much of their income from federal taxation.
State and Local Tax Deductions
New $10,000 deduction limit on state and local taxes, including income and property taxes. Taxpayers can claim the aggregate of state and local property taxes capped at $10,000. Interest can be deducted at $750,000 down from $1 million on the amount of mortgage obligation on new home purchases.
Home Equity Deduction
HELOC (Home Equity Line of Credit) was tax deductible when debt was incurred “for reasons other than to buy, build, or substantially improve your home.” This tax deduction has been removed.
Moving Expense Deduction
Certain moving expenses were tax deductible if starting a new job. This is now limited to only active duty in the armed forces.
Increased Child Tax Credit
The Child Tax Credit is doubled from $1,000 per child to $2,000 with an amount that is refundable to $1400. Also, adding a nonrefundable credit of $500 for dependents other than children. Income threshold raised from $110,000 for a married couple to $400,000.
*Please consult a tax advisor
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