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The Tax Cuts and Jobs Act of 2017 Explained - Changes Begin in Tax Year 2018 - YouTube
Channel: Your Money, Your Wealth
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So, today we're going go over some of the
most sweeping tax legislation that we've seen
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since the Tax Reform Act of 1986 under
Ronald Reagan.
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This is called the Tax Cuts and Jobs Act,
which was enacted in December of 2017.
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So, my job, one of these few minutes is to
talk about this legislation which is so sweeping
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that we could probably talk about for half
an hour.
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However, we have about 3 or 4 minutes.
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So, let's get to it.
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The first thing is, what's happened to the
tax brackets across the board,
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they've all come down.
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So, for individuals, the 15% federal brackets come down to 12%,
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The 25% gone to 22%.
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The 28鈥檚 gone to 24. The 33 has gone to 32%.
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And the top rate of 39.6% has come down to 37%.
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Also of note, and we've heard a lot of this
is that for corporations, there are top marginal
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rate has gone from a top bracket of 35%
down to 21%.
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Think about that difference.
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The whole idea here under this legislation
is that companies will have more profits in
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their pockets, more money to spend to hire
more workers and invest in R&D, and the like.
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The effects of this remains to be seen and
will be talked about for I鈥檓 sure decades
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moving forward.
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Now, what it comes down to itemized deductions,
exemptions, standard deductions, things like that,
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you've all heard about.
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What's happened now is a couple of things,
the idea has been
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meant to simplify the tax code.
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So what's happened with regard to exemptions
is the personal exemptions that we have had
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in the past of $4,000 a person, that's gone.
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But what they have done is they've doubled
the standard deduction to $12,000 per person,
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or $24,000 for a married couple, $18,000 for
head of household.
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So, for many individuals who used to itemize
their deductions, they may not get over those
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threshold of 12 or $24,000.
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They much-- they may just be taking the standard
deduction, not itemizing any more.
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A couple other issues, with regard to itemized
deductions, these are near Schedule A
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of your tax return.
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So, what's called the State and Local Tax
Deduction, or SALT deduction, has now been limited
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What it used to be was that if you had deductions
for state property taxes, state income taxes paid
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miscellaneous deductions that you've
paid in for your car and things like that.
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Whatever that total amount was, if it $50,000,
you could take that on your
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Schedule A itemized deduction.
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Now, that figure is limited to $10,000 per taxpayer.
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So, that's going to limit substantially the
number of people that likely will be able
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to itemize their deductions moving forward.
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Now with regard to home mortgage interest
deduction, the prior law said that if you
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had a mortgage balance of a million dollars,
you can deduct fully the interest charge on
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that million dollar number.
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Now that figure has been brought down to $750,000.
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So, now the aggregate amount of interest you can
deduct or principal is 750.
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Now, if you have a second home or second property
that also is eligible for deduction, but the
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aggregate amount between those two cannot
exceed 750 between your first and second home.
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Finally, your home equity line of credit that
you had, used to be able to deduct that interest,
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you can no longer deduct that interest under
the Tax Cuts Jobs Act.
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Next, with regard to the estate tax, so under
prior legislation individuals could leave
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$5.5 million of their estates tax-free to
their beneficiaries or $11 million
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if they were married.
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That amount now doubles on the Tax Cuts and
Jobs Act to $11 million per person.
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22 million bucks if you're married.
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Those of you that own small businesses or
are sole proprietors, it used to be under
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prior tax legislation all that income would
flow directly through to the front page of
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your tax return as ordinary income.
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Under the new legislation you can deduct,
it's called a qualified business income of
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the 20% of your QBI gets deducted.
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So it's going to be a huge tax break for small
business owners.
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Finally, with regard to Roth conversions.
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This is a major new piece of legislation under
the new tax law.
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Any amounts you convert from your IRA to a
Roth IRA can no longer be re-characterized.
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Under prior legislation, if you converted
amounts in 2016, you had up until your tax
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filing deadline for 2016 to re-characterize,
that would be April or October
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of the following year.
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So any amounts you converted you could re-characterize.
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Now under current tax law, whatever amount
you convert in 2018, they're stuck.
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You can no longer go back.
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So just be very, very careful, especially if
you have adjustable income that you might
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want to wait until the end of the year of
2018 or whatever year you're converting to
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make sure you're not over converting into
brackets that you don't want to be in because
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any amount you convert they are stuck
there permanently.
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For more information on the Tax Cuts and Jobs
Act of 2017 go to PureFinancial.com.
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