Top 12 Things You Must Know About the New Tax Laws | 2018 Tax Reform Explained

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The changes to the new tax law may have you left with many unanswered questions. I want to make sure that you’re able to understand the key points to the new changes in the latest 2018 tax reform.

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Top 12 Things You Should Know About the New Tax Reform

1 – We still have seven tax brackets for individuals, but the tax rates have changed.

You’ll notice that the rates for some of these brackets have been lowered compared to the 2017 brackets.

NEW 2018 Taxable Income Brackets and Rates (Estimate)

RateSingle FilersMarried Joint FilersHead of Household FilersMarried Separate Filers
10%Up to $9,525Up to $19,050Up to $13,600Up to $9,525
12%$9,526 to $38,700$19,051 to $77,400$13,601 to $51,800$9,526 to $38,700
22%$38,701 to $82,500$77,401 to $165,000$51,801 to $82,500$38,701 to $$82,500
24%$82,501 to $157,500$165,001 to $315,000$82,501 to $157,500$82,501 to $157,500
32%$157,501 to $200,000$315,001 to $400,000$157,501 to $200,000$157,501 to $200,000
35%$200,001 to $500,000$400,001 to $600,000$200,001 to $500,000$200,001 to $300,000
37%$500,000+$600,000+$500,000+$300,000+

2017 Taxable Income Brackets and Rates (Estimate)

RateSingle FilersMarried Joint FilersHead of Household FilersMarried Separate Filers
10%$0 to $9,325$0 to $18,650$0 to $13,350$0 to $9,325
15%$9,326 to $37,950$18,651 to $75,900$13,351 to $50,800$9,326 to $37,950
25%$37,951 to $91,900$75,901 to $153,100$50,801 to $131,200$37,351 to $76,550
28%$91,901 to $191,650$153,101 to $233,350$131,201 to $212,500$76,551 to $116,675
33%$191,651 to $416,700$233,351 to $416,700$212,501 to $416,700$116,676 to $208,350
35%$416,701 to $418,400$416,701 to $470,700$416,701 to $444,550$208,351 to $235,350
39.6%$418,401+$470,701+$444,551+$235,351+

2 – The standard deduction has almost been doubled.

  • For single taxpayers, the standard deduction has increased from $6,350 to $12,000
  • Head of household $9,350 to $18,000
  • Married filing jointly, it’s increased from $12,700 to $24,000

The increases will possibly push more taxpayers to take the standard deductions versus itemizing their deductions.

3 – No more personal or dependent exemptions.

For example, in the previous tax year, you could claim a personal exemption for yourself and spouse if married of $4,050. In addition, you could claim $4,050 dependent exemption for each qualified dependent.

That is no more.

Here are some examples of how these changes will affect most taxpayers

Please be advise that these calculations are estimates and do not include adjustment or credits.

Single Filers
Deductions20172018
Standard Deduction$6,350.00$12,000.00
Exemptions$4,050.00$0.00
Total$10,400.00$12,000.00
DeductionsDeductionsDeductions
Deduction Increase $1600
Married Joint Filers No Dependents
Deductions20172018
Standard Deduction$12,700.00$24,000.00
Exemptions$8,100.00$0.00
Total$20,800.00$24,000.00
Deduction Increase $3200
Married Joint Filers + 2 Dependents
Deductions20172018
Standard Deduction$12,700.00$24,000.00
Exemptions$16,200.00$0.00
Total$28,900.00$24,000.00
Deduction Loss $4900
Head of Household + 2 Dependents
Deductions20172018
Standard Deduction$9,350.00$18,000.00
Exemptions$12,150.00$0.00
Total$21,500.00$18,000.00
Deduction Loss $3500

4 – Mortgage interest deduction has been lowered from $1 million to the first $750,000 of your mortgage debt.

This change will only affect new homeowners, so if you are a current homeowner then you’re okay.

5 – The moving expense deduction has been eliminated.

Exceptions apply to member of the military.

6 – The child tax credit has increased.

The child tax credit has doubled from $1000 to $2,000 for children under 17. The full credit can be claimed by single parents (HOH) who make up to $200,000, and married couples (MFJ) who make up to $400,000. The credit will begin to phase out once you hit those income limits.

Note: The refundable portion of the credit is limited to $1,400.

7 – The state and local tax deduction is now capped at $10,000.

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8 – Major changes for 529 savings accounts.

In previous years, untaxed money put into a 529 savings accounts could only be used for college expenses. Now, up to $10,000 can be distributed annually to cover the cost of sending a child to a public, private or religious elementary or secondary school.

9 – Tax deduction for alimony payments will be eliminated.

This provision will apply to couples who signed divorce or separation paperwork after December 31, 2018.

10 – Tax preparation deduction will be eliminated.

In previous tax years, you could deduct the cost of having your taxes done by a tax advisor or the money on a tax prep software. This deduction will no longer be available.

11 – A decrease in the corporate tax rate.

The corporate tax rate will be cut from 35% to 21%.

12 – The individual mandate on health insurance (Obamacare) will be eliminated.

The elimination of the individual mandate, which penalizes people who do not have health care, goes into effect in 2019.

I hope this summary of the 2018 new tax laws help you navigate easily through the tax season. Let me know which tip was a big surprise for you. If you want more handy tax tips, then feel free to check out my latest articles here.


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