Signed into law late in 2017, the Tax Cuts and Jobs Act slashed the corporate tax rate from 35 percent to 21 percent.
Proponents of the law say it will stimulate the economy and create jobs, but how does it actually affect you? We should also note that everything we describe below will end after 2025, assuming legislators don’t vote to extend the cuts.
For now, here are a some of the key points:
- Estate taxes – The new law nearly doubles the federal exemption threshold for estate taxes, which will jump from roughly $11.1 million to $22.36 million.
- Tax rates – Tax rates are slightly reduced under the law, which also adjusts tax brackets, with the highest bracket dipping from nearly 40 percent to 37 percent.
- Standard deductions – The standard deduction nearly doubles for single files – to the tune of $12,000 – and goes up to $18,000 for heads of households and $24,000 for married couples filing jointly. The personal exception
- Personal exemptions – Personal exemptions, valued at $4,050 per taxpayer, will be phased out.
- State and local tax deductions – These are capped at $10,000
- Home mortgage interest deduction – The $1 million limit on deducting interest on mortgages is unchanged for existing mortgages. But if you took out a mortgage after Dec 15, 2017, the cap is now $750,000. The law eliminates the deduction for interest on home equity loans.
- Medical expense deduction – This deduction gets beefed up under the new law, allowing taxpayers to deduct medical expenses in excess of 7.5 percent of their adjusted gross income in 2017 and 2018. After that, it reverts to 10 percent.
- 529 plans – These plans were meant to help people save money to pay for college, but can now also be used to fund elementary and secondary school expenses at public, private and religious institutions. Capped at $10,000 per student per year.
Do you need help with estate taxes or estate planning in Bucks, PA? The attorneys at Gummer Elder Law can help make sure your loved ones are cared for after you’re gone and get everything they deserve. Contact us today to learn more.