What the New Tax Bill Means for You
Changes for Individuals
The Tax Policy Center projects that taxes will fall for all income groups and result in an increase of 2.2 percent in after-tax income. The Tax Policy Center also cautions, however, that some individuals and households may see a higher tax bill.
Highlighted below are some of the major changes:
• Reduction in most marginal income tax brackets
• Near doubling of the standard deduction
• Elimination of personal exemption
• A $10,000 cap on the state and local tax deduction
• An increase in the child tax credit and the expansion of eligible families
• Mortgage interest deductibility limited to mortgages up to $750,000 (reduced from $1 million)
• Medical expenses deductibility will kick in at 7.5 percent of income, down from 10 percent
• 529 plans may now be used to fund elementary and secondary education
• Alternative Minimum Tax is curtailed
• 401(k) borrowers will have more time to repay plan loans when leaving an employer
• Elimination of the ability to “undo” a Roth conversion
These tax changes may have a wide-ranging impact on the financial choices we make. For example, we may want to consider the best use for our additional after-tax income.
Check back next month, when we will review changes for business, estates and the overall investment opportunities for the year.
The information in this material is not intended as tax advice, and may not be used for the purpose of avoiding any federal tax penalties. Anne Ramirez is Investment Manager at Clarity Financial Services, in Tucson. Connect at 520-955-2495, ARamirez@1stAllied.com or CFSTucson.com. See ad, page 4.