The top five tax changes for 2018: What you need to know

Individuals 03.08.2019 3 MIN READ

More than 600 changes were instituted under the Tax Cuts and Jobs Act (TCJA) enacted in December 2017. We’ve put together a list of five of the most important changes that taxpayers will need to be aware of when preparing their 2018 taxes. This list is by no means exhaustive, and we suggest consulting with your tax advisor before filing.

Tax preparation—with some new twists

Income tax brackets and rates changed. Most notably, the top bracket tax rate was reduced from 39.6% to 37%—with similar rate reductions in other brackets. However, some brackets widened and others narrowed.

Income tax brackets for singles

Rate:	Taxable income bracket:
10%	$0 to $9,525
12%	$9,526 to $38,700
22%	$38,701 to $82,500
24%	$82,501 to $157,500
32%	$157,501 to $200,000
35%	$200,001 to $500,000
37%	$500,001 and up

Income tax brackets for marrieds filing jointly

Rate:	Taxable income bracket:
10%	$0 to $19,050
12%	$19,051 to $77,400
22%	$77,401 to $165,000
24%	$165,001 to $315,000
32%	$315,001 to $400,000
35%	$400,001 to $600,000
37%	$600,001 and up

Income tax rates for head of household

Rate:	Taxable income bracket:
10%	$0 to $13,600
12%	$13,601 to $51,800
22%	$51,801 to $82,500
24%	$82,501 to $157,500
32%	$157,501 to $200,000
35%	$200,001 to $500,000
37%	$500,001 and up

The standard deduction increased for single taxpayers from $6,350 to $12,000, and for married filing jointly from $12,700 to $24,000. Many who had previously itemized will now take the standard deduction. The standard deduction is subtracted from your Adjusted Gross Income (AGI), which means it reduces your taxable income.

For tax year 2018, the standard deduction amounts are as follows:

Filing status:	Standard deduction:
Single	$12,000
Married filing jointly or qualifying widow(er)	$24,000
Married filing separately	$12,000
Head of household	$18,000

There is an additional standard deduction for elderly and blind taxpayers, which is $1,300 for tax year 2018. This amount increases to $1,600 if the taxpayer files as single or head of household.

Personal exemptions were eliminated (previously $4,050 per person). This exemption was available to all taxpayers, with a few exceptions. You were allowed to claim an exemption for yourself and any dependents. For families, this was particularly beneficial. The new, increased standard deduction should help those families negatively affected by this elimination.

There are still ways to reduce your adjusted gross income by contributing to your health savings account (HSA) or retirement account, such as an IRA or 401(k). You can contribute to an IRA right up until the due date of your tax return (without extensions). It’s always a good idea to put more money in your own pocket, and if it helps you decrease your tax liability, then it’s a win-win!
The deduction for state/local property taxes and income taxes (SALT) is now limited to $10,000. This has had a chilling effect on taxpayers in high-tax states like California, New York, Vermont, South Carolina and New Jersey. Folks in these states with high incomes and/or high property taxes who have traditionally itemized deductions will likely have a higher tax bill.
For the years 2018–2025, unless grandfathered, the limit on mortgages qualifying for the home mortgage deduction is reduced from $1,000,000 to $750,000 ($500,000 to $375,000 for those who elect married filing separately) on mortgage debt used to buy or improve a first or second residence. This is known as “home acquisition debt.”

The TCJA also eliminates the provision that allowed interest deductions on up to an additional $100,000 ($50,000 for those who elect married filing separately). This was an amount that could have exceeded the prior $1,000,000 limit noted above, and is categorized by the IRS as “home equity debt.” It is, however, still important to understand that home equity loans and lines of credit could generate deductible interest should they: 1) fall within the applicable overall “home acquisition debt” limit, and 2) be used to buy or improve a first or second residence.