Child Tax Credit increases, no more personal tax exemption, no more educator expenses, no more alimony tax deduction, tax rate changes, and much more.
Scroll down for the Tax Reform Individual Tax Rate Schedule.
See all the changes to your 2020 Tax Refund – 2019 Tax Return.
- Increases the Child Tax Credit: The Child Tax Credit is increased from $1,000 to $2,000 per child (first $1,400 is refundable). The credit will start to phase out at $400,000 and more than $200,000 for other taxpayers. This increased amount would phase out in eight years.
- Eliminates the Personal Tax Exemption: The doubled standard deduction replaces the personal tax exemption.
- Changes the Seven Tax Rates: The new rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. They will phase out in eight years.
- Doubles the Standard Deduction: The standard deduction amount is increased from $6,350 to $12,000 for Single and Married Filing Separately filers, $12,700 to $24,000 for Married Filing Jointly and Widow filers, and $9,350 to $18,000 for Heads of Household.
- Eliminates Some Itemized Deductions Subject to the 2% AGI floor for Eight Years
- Eliminates Income Phaseout on Total Itemized Deductions for Eight Years
- Decreases the Mortgage Loan Amount Limit for the Mortgage Interest Tax Deduction: For new loans starting in 2018, taxpayers can deduct their mortgage interest of a loan up to $750,000 ($375,000 for Married Filing Separately taxpayers). This is a decrease from the current loan amount of $1 million. It will go back to the original $1 million amount in 2026.
- Increases the Tax Deduction for Charitable Contributions: The limit for charitable cash donations to public charities and certain other organizations increases from 50% to 60% (except deductions combined with preferred seating at college sports events). The charitable standard mileage rate stays at 14% with no adjustment for inflation.
- Adds a New Tax Credit for Non-Child Dependents: There is a new $500 nonrefundable tax credit for non-child dependents/parents who are U.S. citizens. The credit can be applied to children over 17 years old, senior parents, or children with disabilities. The dependent’s Social Security Number (SSN) must be issued and provided to the IRS by the due date of a tax return in order to qualify for the credit.
- Reduces the State and Local Tax Deduction: State and local property taxes up to $10,000 can be deducted, in addition to income taxes or sales taxes.
- Decreases the Medical Tax Deduction Rate: The Medical Tax Deduction rate is decreased from 10% to 7.5% for 2017 and 2018 Tax Returns, regardless of age. It will rise back to 10% in 2019.
- Eliminates the Moving Expenses Deduction: You can no longer deduct moving expenses related to a new job (there are some exceptions for active duty military). These expenses include the use of a vehicle as part of a move. This will expire in 2025.
- Eliminates the Tax Deduction for Casualty and Theft Loss: All tax deductions for casualty and theft loss are eliminated (except for those losses attributable to a federal disaster as declared by the President) from 2018 to 2025.
- Eliminates the Tax Deduction for Educator Expenses
- Eliminates the Tax Deduction for Tax Return Preparation Expenses
- Doubles the Estate or “Death” Tax: The Estate Tax amount is doubled from $5.5 million to $11.2 million ($22.4 million for married taxpayers), which will increase with inflation. The doubled amount will expire on December 31, 2025.
- Eliminates the Individual Health Care Tax Penalty: The tax penalty for not having health insurance will be eliminated in 2019. This means you would still be required to pay the penalty in 2018 (for 2017 Tax Returns) and 2019 (for 2018 Tax Returns), but not in 2020 (for 2019 Tax Returns).
- Eliminates Roth IRA Re-conversion: If you converted your traditional IRA to a Roth IRA, you can no longer reconvert it back to an traditional IRA. Initial conversions from traditional Roth IRA are not affected.
- Includes All Gambling Expenses as Deductible Losses Up to Amount of Total Winnings
- Eliminates Home Office Deduction for Employees
- Eliminates Business Mileage Rates As Itemized Deductions For Un-Reimbursed Employee Travel Expenses
Tax Reform Changes for Tax Years 2019 and 2020
- Eliminates the Tax Deduction for Alimony (only applies to payments required under a divorce or separation agreement made after the end of 2018)
What is Not Changing in Tax Reform
Here are items from the current tax code that will not change:
- Earned Income Tax Credit: The maximum amount is $6,444 for taxpayers filing jointly who have 3 or more qualifying children.
- American Opportunity Tax Credit
- Student Loan Interest Deduction
- Adoption Tax Credit
- Alternative Minimum Tax: The amounts permanently adjusted for inflation are $70,300 for Single and Head of Household filers, $109,400 for Married Filing Joint filers and widowers, and $54,700 for Married Filing Separately filers.
- Tax Deductions for 401K and IRA Retirement Savings Options
- Capital Gains and Dividend Rates
- Investment Interest Expense Tax Deduction
- Real Estate Tax Deduction for State and Local Property Up to $10,000
- Home Office Deduction for Self-Employed Taxpayers
Tax Reform Individual Tax Rate Schedule
| Tax Rate | Single | Married/Joint & Widow(er) | Married/Separate | Head of Household |
|---|---|---|---|---|
| 10% | $1 to $9,525 | $1 to $19,050 | $1 to $9,525 | $1 to $13,600 |
| 12% | $9,526 to $38,700 | $19,051 to $77,400 | $9,526 to $38,700 | $13,601 to $51,800 |
| 22% | $38,701 to $82,500 | $77,401 to $165,000 | $38,701 to $82,000 | $51,801 to $82,500 |
| 24% | $82,501 to $157,000 | $165,001 to $315,000 | $82,501 to $157,000 | $82,501 to $157,500 |
| 32% | $157,001 to $200,000 | $315,001 to $400,000 | $157,001 to $200,000 | $157,501 to $200,000 |
| 35% | $200,001 to $500,000 | $400,001 to $600,000 | $200,001 to $300,000 | $200,001 to $500,000 |
| 37% | over $500,000 | over $600,000 | over $300,000 | over $500,000 |
Check out our post regarding 2019 tax reform changes here.