The basic things you need to know about the Tax Cuts and Jobs Act of 2017.
First, most of the provisions of the law go into effect for the tax year 2018. That means it is effective now, but you may not see the actual changes until you go to prepare your tax return in early 2019. Regardless, since the law is in effect now, you need to do your tax planning now.
Each family will be affected differently depending on the size of the family, amount of income, type of income, and other individual circumstances.
Much was made of changes to personal income tax brackets. There are still 7 brackets with slight changes in percentages. Most people will probably not see large changes in their taxes. The highest bracket will actually see an increase in taxes owed even though the percentage the bracket pays is lower.
The standard deduction is doubled. However, the personal deduction is eliminated. So, the net change should lower income taxes for most families, but not as much as the hype around doubling the standard deduction led people to believe.
Student loans interest deductions and charitable deductions remain unchanged. Mortgage interest is still deductible for most people but is capped at $1 million of debt for current borrowers and $750k of debt for new loans. There is no deduction for interest on home equity loans. State and local tax deductions are capped at $10,000.
The child tax credit doubles from $1,000 to $2,000 per child under age 17. The income threshold have increased so that more people will be able to use the deduction.
Estate taxes have essentially doubled. Where the estate tax exemption was around $5.5 million for 2017 for an individual, it is now $11.2 million for an individual and $22.4 million for a married couple. The estate tax rates are unchanged.
More a more complete summary of the changes, we are preparing a slide show that we will link to here as soon as it is ready.