• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar

Everything-Business

Business, personal finance and tech tips

  • Business
    • Technology
    • Investing
  • Consumer
    • Personal Finance
    • Entrepreneurs

The Biggest Changes Spurred on by the Tax Cuts and Jobs Act

Since the signing of the new tax law, the Tax Cuts and Jobs Act (TCJA), the news has been flooded with what it claims to be the biggest tax code revision in more than three decades. The tax bill, which was signed into law last December by President Trump, became effective January 1, 2018, and will continue through the end of 2025. The revision will affect both business owners and individuals.

The biggest question for most is “Will my taxes increase or decrease next year, and by how much?” As most tax professionals would attest, everyone’s situation is unique and requires specific attention. While one size may not fit all, we’ll take a look at some of the biggest changes garnering the spotlight and those likely to affect most Americans. We’ll steer clear of technical and tax code jargon to keep things simple. Consult a tax professional for specific information concerning your circumstances. The information listed below is provided to make you aware of these changes and offer a better understanding.

Mortgage Interest Deduction

Deductible interest amounts are reduced to $750,000, down from $1,000,000. This new reduction does not apply to mortgages that were in place before December 15, 2017.

Home Equity Debt Not Deductible

As of 2018, interest paid on a home equity loan/lines of credit will no longer qualify as a deductible mortgage interest, unless the money is used specifically to build or vastly improve a primary residence or second home. Also, the total debt on both homes cannot exceed mortgage limits of $750,000, or $1,000,000 if including the debt of the home equity loan/line of credit for mortgages held prior to December 15, 2017. Home equity debt used for any other purpose no longer qualifies as deductible mortgage interest.

New Nonrefundable Credit & Increased Child Tax Credit

The Child Tax Credit increases from $1,000 to $2,000 per eligible child. Also, the refundable portion of this credit increases from $1,000 to $1,400. It also allows taxpayers to earn more income and continue to receive the credit. The maximum adjusted gross income for a married couple filing jointly was $110,000 in 2017. In 2018, the same couple can make up to $400,000 and still claim the credit. The TCJA also grants a $500 nonrefundable tax credit for other dependents who do not meet the requirements of the child tax credit; a dependent child 17 years or older or a qualifying dependent relative.

Standard Deduction Increases

One major revision to the TCJA is the increase in the Standard Deduction. For 2018, single taxpayers are allowed a standard deduction of $12,000, up from $6,300 in 2017; compared to married taxpayers filing jointly who allowed a $24,000 deduction, up from $12,700 in 2017. This could eliminate the need for most Americans to itemize deductions.

Elimination of Personal Exemptions

Another major revision is the personal tax exemption. It is no longer included in 2018. We can wave bye-bye to this exemption.

20% Deduction For Business Owners

In a nutshell, taxpayers who own their own business must earn a taxable income below $157,500 if single, or $315,000 if married filing jointly to take the full 20% deduction. Taxpayers earning more than the limitations above will not receive the full 20% deduction and further limitations apply.

Primary Sidebar

Email Newsletter

  • Facebook
  • Flickr
  • Instagram
  • LinkedIn
  • Medium
  • Pinterest
  • Tumblr
  • Twitter

Recent Posts

  • Leveraging Customer Profiles
  • Richelieu (Rich) Dennis: A CEO and a lifelong Philanthropist
  • Long Term Care in Canada
  • Great Sales Habits & Traits To Incorporate For Success Now
  • What is the Difference Between Leasing and Financing a Car?

Copyright © 2023 ยท Everything-Business