Tax Reconciliation Act

INDIVIDUAL PROVISIONS

Provision Current Tax Law New Tax Law
Individual Income Tax Rates Top rate of 39.6 percent.  Seven tiers Top rate of 37 percent.  Seven tiers
Child Tax Credit $1,000 subject to income phase outs ($75,000 for single filers and $110,000 for MFJ) $2,000 ($1,400 of which is refundable) Increased phase outs ($200,000 for single filers and $400,000 for MFJ)
Education Credits Three higher education tax credits No explicit change.  Expanded the use of 529 to include elementary and secondary education
Personal Exemption $4,150 Repealed
Standard Deduction $6,500 for single, $9,500 for HOH, and $13,000 for MFJ $12,000 for single, $18,000 for HOH, and $24,000 for MFJ
Capital Gains Rate Top rate of 20 percent No change
Alternative Minimum Tax 28 percent top rate; exemption of $55,400 for single filers ($86,200 MFJ); exemption amounts begin to phase out at $123,100 & $164,100, respectively 28 percent top rate; exemption of $70,300 for single filers ($109,400 MFJ) beginning after 12/31/2017; exemption amounts begin to phase out at $500,000 & $1 million, respectively
Educator Expense Deduction of $250 for single filers and $500 for MFJ No change
Moving Expenses Deduction if certain criteria are met Repealed
Alimony Paid Deduction allowed for qualifying amounts paid under a divorce instrument Repealed (Effective for divorce decrees executed after 12/31/18
Tuition and Fees Deduction allowed for qualified tuition and fees paid (phased out based upon income levels No change
Student Loan Interest Deduction up to $2,500 for qualified student loan interest that is phased out based upon income (less than $80,000 for single and $160,000 for MFJ) No change
Medical and Dental Expenses Out of pocket expenses paid are deductible to the extent they exceed 10 percent of adjusted gross income For 2017 & 2018, deduction for out-of-pocket expenses paid or incurred during year to extent expenses exceed 7.5 percent of AGI; threshold raises to 10 percent of AGI beginning in 2019
State and Local Taxes Paid Deduction allowed for State, local & foreign real property taxes, State and Local personal property taxes and State and Local incomes Deduction is retained; however, it is limited to $10,000
Home Mortgage Interest Mortgage interest paid or incurred on up to $1 million of acquisition indebtedness and $100,000 of home equity indebtedness Mortgage interest paid or incurred on up to $750,000 of acquisition indebtedness.  Home equity loan deduction eliminated.  Existing loans are grandfathered in
Charitable Giving Deduction allowed:  Limited to 50 percent of Adjusted Gross Income Deduction allowed:  Limited to 60 percent of Adjusted Gross Income
Miscellaneous Itemized Deductions Deduction for tax preparation fees, out of pocket work expenses, and other miscellaneous items paid subject to a 2 percent of adjusted gross income threshold Repealed
Casualty and Theft Losses Deduction allowed subject to certain thresholds Repealed unless a major natural disaster occurs
Family Flexibility Credit Not discussed $500 nonrefundable credit for dependents other than qualifying children.  Phaseouts exists relative to income
IRA Recharacterizations Allowed for traditional IRA and Roth IRA.  Permits the use for conversions Recharacterization will no longer be allowed to unwind a Roth IRA conversions
Sale of Home Exclusion allowed up to $250,000 for single filers and $500,000 for MFJ if certain criteria are met No change
Discharge of Student Loan Debt Generally treated as taxable income If discharged due to death or disability, excluded from taxable income
Health Insurance Mandate Individuals not covered under a health plan required to pay a penalty if certain criteria are present Penalty removed after 12/31/18
Carried Interest Capital gains rate after one-year holding period for interests received in exchange for performance of services Capital gains rate after three-year holding period
Identification of share of stock sold Taxpayers can choose either FIFO or specific identification method when selling lots of stocks No change
Non-passive losses from flow through entities Deductible to extent sufficient tax basis was present Limited to $250,000 for single filers and $500,000 for MFJ.  The excess loss will be treated as a net operating loss and carried forward

 

  2018 Ordinary Rates 2018 Capital Gains Rates
Bracket Current Law* Tax Reconciliation Act (Conference Agreement) *^ Current Law* Tax Reconciliation Act (Conference Agreement) *^
$0–$9,525 10% 10% 0% 0%
9,526–38,600 15% 12% 0% 0%
38,601–38,700 15% 12% 0% 15%
38,701–82,500 25% 22% 15% 15%
82,501–93,700 25% 24% 15% 15%
93,701–157,500 28% 24% 15% 15%
157,501–195,450 28% 32% 15% 15%
195,451–200,000 33% 32% 15% 15%
200,001–424,950 33% 35% 15% 15%
424,951–425,800 35% 35% 15% 15%
425,801–426,700 35% 35% 15% 20%
426,701–500,000 39.6% 35% 20% 20%
More than 500,000 39.6% 37% 20% 20%

Individual Brackets

Single

Head of Household

  2018 Ordinary Rates 2018 Capital Gains Rates
Bracket Current Law* Tax Reconciliation Act (Conference Agreement) *^ Current Law* Tax Reconciliation Act (Conference Agreement) *^
$0–$13,600 10% 10% 0% 0%
13,601–51,700 15% 12% 0% 0%
51,701–51,800 15% 12% 0% 15%
51,801–51,850 15% 22% 0% 15%
51,851–67,500 25% 22% 15% 15%
67,501–82,500 25% 22% 15% 15%
82,501–133,850 25% 22% 15% 15%
133,851–157,500 28% 24% 15% 15%
157,501–200,000 28% 32% 15% 15%
200,001–216,700 28% 35% 15% 15%
216,701–424,950 33% 35% 15% 15%
424,951–452,400 35% 35% 15% 15%
452,401–453,350 35% 35% 15% 20%
453,351–500,000 39.6% 35% 15% 20%
More than 500,000 39.6% 37% 20% 20%

Married Filing Separately

  2018 Ordinary Rates 2018 Capital Gains Rates
Bracket Current Law* Tax Reconciliation Act (Conference Agreement) *^ Current Law* Tax Reconciliation Act (Conference Agreement) *^
$0–$9,525 10% 10% 0% 0%
9,526–38,600 15% 12% 0% 0%
38,601–38,700 15% 12% 0% 15%
38,701–45,000 25% 22% 15% 15%
45,001–70,000 25% 22% 15% 15%
70,001–78,075 25% 22% 15% 15%
78,076–82,500 28% 22% 15% 15%
82,501–118,975 28% 24% 15% 15%
118,976–157,500 33% 24% 15% 15%
157,501–200,000 33% 32% 15% 15%
160,001–200,000 33% 32% 15% 15%
200,001–212,475 33% 35% 15% 15%
212,476–240,025 35% 35% 15% 15%
240,026–300,000 39.6% 35% 20% 15%
300,001–425,800 39.6% 37% 20% 20%
More than 425,800 39.6% 37% 20% 20%

Married Filing Jointly

  2018 Ordinary Rates 2018 Capital Gains Rates
Bracket Current Law* Tax Reconciliation Act (Conference Agreement) *^ Current Law* Tax Reconciliation Act (Conference Agreement) *^
$0–$19,050 10% 10% 0% 0%
19,051–77,200 15% 12% 0% 0%
77,201–77,400 15% 12% 0% 15%
77,401–156,150 25% 22% 15% 15%
156,151 – 165,000 28% 22% 15% 15%
165,001–237,950 28% 24% 15% 15%
237,951–315,000 33% 24% 15% 15%
315,001–400,000 33% 32% 15% 15%
400,001–424,950 33% 35% 15% 15%
424,951–479,000 35% 35% 15% 15%
479,001–480,050 35% 35% 15% 20%
480,051–600,000 39.6% 35% 20% 20%
More than 600,000 39.6% 37% 20% 20%

 

BUSINESS PROVISIONS

Corporate Tax Rate Top rate of 35 percent Flat rate of 21 percent
Pass-Through Tax Rate Taxed at ordinary income tax rate 20 percent of domestic qualified business income, subject to various limitations and thresholds
Alternative Minimum Tax 20 percent Repealed; Credits refundable from 2018 to 2021
Personal Service Corporations Flat rate of 35 percent Flat rate of 21 percent
Bonus Depreciation Qualified property allowed 40, 30, & 20 percent bonus depreciation 100 percent through 2022 for qualified property placed in service after 9/27/2017(3); 80, 60, 40 & 20 percent bonus depreciation for property placed in service in 2023–2026, respectively; excludes certain property used in regulated public utility businesses & property used in a trade or business that has floor plan financing indebtedness; includes qualified film, television & live theatrical productions
Dividends Deduction 70 and 80 percent deduction allowed for qualified ownership percentages The deduction amount is reduced to 50 percent and 65 percent
Section 179 Up to $520,000 with phaseout beginning at $2,070,000 of assets placed in to service Up to $1 million with the phaseout beginning at $2.5 million
Interest Expense Deduction allowed Limited to business interest income, floor plan financing interest, and 30 percent of entity’s adjusted taxable income with any excess carried forward
Like-Kind Exchanges Deferral of gain permitted on exchanges of certain property Deferral of gain is limited to real property that is not held primarily for sale
Cost recovery for residential rental and nonresidential rental property 27.5 years for residential rental real property and 39 years for nonresidential real property No change; Added a 30-year alternative depreciation system recovery period for residential rental property
Net Operating Losses Carried back two years and forward 20 years Limitation of 80 percent of taxable income for periods after 2017.  Carrybacks have been eliminated and carried forwards exist indefinitely
Cash Method of Accounting C Corporations under $5 million gross receipts C Corporation with less than $25 million of gross receipts
Entertainment Expenses Deduction limited to 50 percent of expense No deduction

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