A final tax bill was released on Friday and is likely to be passed this week, which would allow for President Trump to sign it into law by year end. Many taxpayers are wondering what it will mean for them. Here are some key components of the plan as we know them for individuals and businesses:

 INDIVIDUALS              

Standard deduction- will be almost doubled.

Single Filers- currently at $6,350 will go to $12,000

Couples Filing Jointly- currently at $12,700 will go to $24,000

Tax brackets- While Republicans wanted to reduce the number of tax brackets down to four, what prevailed in the final agreement was keeping the number at seven, with slight changes. The rates will be 10%, 12%, 22%, 24%, 32%, 35%, and 37%. (Previous brackets were 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.) The new rates are set to expire in 2025, along with the new standard deduction provision.

Personal exemptions, which reduce taxable income (in 2017 by $4,050 each for taxpayers and dependent children) have been eliminated.

Child Tax Credit This credit has been increased to $2,000 per child, of which $1,400 will be refundable (meaning it would be paid to parents even if they have no tax liability) This credit begins to phase out when family income exceeds $400,000.

Student Loan Interest  Student loan interest will continue to be deductible subject to income thresholds. The deferred tuition for graduate students who teach or for children of university employees will remain as not taxable.

Educator Expense- Teachers can still deduct supplies they buy for their classrooms, subject to limits.

Alimony- Starting in 2019, alimony will no longer be deductible by the payor for new decrees. Also, payments will be excluded from the recipient’s income.

Health Care Individual Mandate- Beginning in 2019, the mandate that people have health insurance or face fines will be repealed. Those without coverage in 2018 will still be subject to the penalty.

State and Local Tax Deduction- Taxpayers who itemize will be able to deduct a new maximum of  $10,000 in state and local property, sales, or income taxes on their federal return.

Mortgage Interest Deduction- For those who still itemize, mortgage interest remains deductible. The interest on home equity loans will no longer be deductible. In addition, for new mortgages on first and second homes, only the interest on the first $750,000 borrowed will be deductible, a change from the current $1 million cap.

Medical expenses- Taxpayers who itemize will continue to be able to deduct medical expenses. For 2018 and 2019, expenses that exceed 7.5% of AGI will be deductible. In 2020, the percentage increases to 10%. (The bill also made the reduction in the threshold from 10% to 7.5% retroactive to 2016.)

Charitable Deductions- Taxpayers who itemize will still be able to utilize this deduction, and the limitation will increase to 60% from the current limitation of 50%.

Losses from fires, floods, or other events- Losses will no longer be deductible unless covered by specific federal disaster declarations.

Estate Tax- The exemption from the 40% tax will be doubled, so no estate worth less than $11 million will be taxed.

Alternative Minimum Tax-  AMT remains for individuals, but the exemption will be increased to $1 million for couples.

Things that have not changed-

*IRA and 401(k) accounts

*Adoption Tax Credit

*Earned Income Tax Credit

*Private activity bonds used to build hospitals or low-income housing

*Affordable Care Act tax on investment income

BUSINESSES

Corporate Tax Rate- Will be reduced to 21 percent from 35 percent. Assets held by US corporations overseas will be subject to a one -time “deemed repatriation” tax of 8% on fixed assets and 15.5% on cash.

Business Capital Expensing- Businesses will get full and immediate expensing of new buildings and equipment, but the provision will begin to phase out after 5 years.

Pass Through Businesses- Business owners that "pass through" profits and losses on their personal income tax return will be able to deduct the first 20 percent of income tax-free. Those in personal service businesses -- doctors or lawyers, for instance -- can only take this deduction if their taxable income is under $315,000 for married couples or $157,500 for single filers.

Alternative Minimum Tax- Repealed for corporations

While the changes are numerous, rest assured that we will continue to stay informed and will be ready to prepare returns that conform to the new tax reform policy once it is passed.