On November 2, 2017, the Tax Cuts and Jobs Act was released by House Republicans. The bill is scheduled to be marked up by Ways and Means on Nov. 6. If the bill becomes law, it would mark the most significant changes to the federal income tax system in the past 30 years.
One significant change is the increased standard deduction and elimination of personal exemptions. This article summarizes all the changes and then focuses on the changes to the standard deduction and personal exemptions.
Overview of Changes
The bill would reduce the number of tax brackets, increase the standard deduction, repeal personal exemptions, reduce the maximum rate on business income, increase the child tax credit and impose a new family tax credit, repeal the credits for the elderly and for adoption expenses, impose changes to education incentives and to many deductions, including a new limit on mortgage interest, repeal of the personal casualty loss, state income and sales tax, medical expense, moving expense, tax preparation expense, and employee business expense deductions, and a dollar limit on property tax deductions.
The homesale exclusion would be tightened and phased out at higher income levels. There would be many changes to retirement plan rules. The AMT would be repealed, and the basic estate tax exclusion would be doubled and the tax repealed after 2023, with beneficiaries still getting a stepped-up basis in estate property.
The bill also contains extensive changes to corporate and business taxes, foreign income and persons, and exempt organizations.
Standard deduction increased
The bill would increase the standard deduction to $24,000 for joint filers and $12,000 for individuals. This increase would significantly reduce the number of taxpayers who choose to itemize their deductions.
For individuals who are claimed as dependents, the bill would limit the standard deduction to the greater of $500 or the sum of $250 and the individual’s earned income. (Act Sec. 1002(a)).
Personal exemptions repealed
The bill would repeal the deduction for personal exemptions (under current law, for 2018, $4,150, subject to a phase out for higher earners), as well as the personal exemption phase out. (Act Sec. 1003)
The new standard deductions and repeal of personal exemptions would go into effect for tax years beginning after Dec. 31, 2017.
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Columbus, Ohio Tax Lawyer
If you have tax questions, contact the experienced tax lawyer at Porter Law Office, LLC. For any other IRS or state of Ohio tax controversy, contact the experienced Columbus, Ohio tax attorney at Porter Law Office, LLC today for a consultation to discuss your particular IRS tax needs and options.