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Special Section
Individual Taxes
Many individual taxpayers are asking, "How will my tax
situation change in light of the new law?" As with any
tax matter, the answer will vary greatly depending on the
person's specific circumstances. We have summarized
below the changes that will affect a large number of
taxpayers. (Note that the majority of the individual changes
discussed here will expire after 2025 if Congress does not
act to extend those provisions.)
Individual rates and brackets have been revised, and
overall rates are generally lowered, with the top rate drop-
ping from 39.6% to 37%. These tax cuts are scheduled to
expire after 2025, and there is no change to the preferential
long-term capital gains tax rate.
For eligible taxpayers, the child tax credit is increased from
$1,000 to $2,000, and a $500 credit is provided for certain
non-child dependents.
Mortgage interest deductions for new purchases of first
or second homes is capped at $750,000 in mortgage debt
for mortgages incurred after December 15, 2017. There
are no changes for current mortgages put into place under
prior rules. However, home equity loan interest is no longer
deductible, even for existing debt.
Changes to pass-through taxation are significant. We will
need to wait to get more specific as more details are re-
leased, but at some point, there may be the opportunity to
restructure to take advantage of these lower tax rates. (See
the Business Taxes discussion in this article for changes
that can impact flow-through owners.)
With the doubling of the lifetime gift exemption to $11.2
million per person, fewer estates are subject to estate tax.
Consideration should be given to making those gifts sooner
rather than later to lock in the benefit before it is scheduled
to revert back to the lower amounts in 2026.
The standard deduction is nearly doubling. For example,
for married filing jointly, the standard deduction is increasing
from $12,700 to $24,000. That means that if your mortgage
interest and charitable contributions (the only two remain-
ing itemized deductions of considerable size) are less than
that amount, you should consider bundling your charitable
contributions into one year. For example, you could switch
from annual to an every-other-year contribution schedule
in one year you would contribute twice the amount you'd
usually give and then skip the following year. This would
allow you to exceed the standard deduction amount ev-
ery other year in order to maximize the tax benefit of your
charitable contributions.
With the passage of the Tax Cuts and Jobs Act ("Act"), there is much concern as well as
confusion as to the impact the new legislation has on both businesses and individuals alike.
The tax changes contained in the Act are the most sweeping since the Tax Reform Act of 1986.
As with any tax change, there will be winners and losers, but all taxpayers should be familiar
with how the new legislation could affect their specific situation.
Below is a summary of the tax changes we believe will be relevant to you, your company, or
your clients. (Please be aware that changes will likely result as technical corrections are issued
and more guidance is released.)
A Review of the Tax Cuts and Jobs Act
What You Need to Know Now
By Patrick J. Duffany, CPA, JD, Managing Partner Tax, CohnReznick and
Edmund S. Kindelan, CPA, Regional Managing Partner New England, CohnReznick