Facts
About the
Tax Cut
and Jobs
Act, 2017
In late in 2017, the most signifi cant tax reform package since Ronald Reagan held offi ce was passed into
law. While this bill started out as a way to make corporate tax rates more competitive, individual tax pay-
ers are actually the bigger benefi ciary and will be the biggest contributors to the anticipated boost in GDP.
According to estimates prepared by JP Morgan, the new bill may increase U.S. economic activity, i.e.,
Gross Domestic Product (GDP), by an additional 0.3% to 0.6% in 2018 and 0.2% in 2019. Individuals
are more likely to spend their tax savings and that immediately translates into increased economic activity.
Below are 10 highlights from the Tax Cut and Jobs act of 2017 that could benefi t you.
Tax Rates Decrease at Most Income Levels
Tax rates in 5 of the 7 income tiers have been
lowered, and the top fi ve tiers have all shifted
their thresholds higher so income is taxed at
lower rates for longer. In 2018, the top rate is
37% and it doesn’t start until income reaches
$600,000, which is down from the 2017 top
rate of 39.6% on all income over $480,050.
Standard Deduction Essentially Doubles
By almost doubling the Standard Deduction
from $6,350 to $12,000 for single fi lers, and
from $12,700 to $24,000 for married couples
fi ling jointly, many tax payers won’t have to
itemize taxes to get sizable deductions.
By Daniel T. Newquist,
CFP®, AIF®
Daniel T. Newquist, CFP®,
AIF® is a Principal Wealth
Advisor with RNP Advisory
Services, Inc., in Morgan
Hill with over 20 years
experience advising clients
on their personal wealth
and business planning
needs. Investment advisory
services offered through
RNP Advisory Services, Inc.
– a registered investment
advisor. Securities offered
through Securities America,
Inc., member FINRA/SIPC.
RNP Advisory Services
and Securities America are
separate entities. The Invest-
ment Fiduciary standard of
care applies to advisory
services only. dnewquist@
RNPadvisory.com or call
(408) 779-0699.
AMT Going Away for Most
Republicans wanted to do away with the
Alternative Minimum Tax (AMT) but were
unsuccessful in getting the math to work out.
They did, however, make it harder for the
AMT to get triggered on middle income
earners.
State and Local Taxes Deduction
Limited to $10,000
The amount of state and local taxes that joint
fi lers are able to deduct is now capped at
$10,000. Previously, it was unlimited. This
impacts tax payers that live in high income tax
states or where property taxes are high.
Mortgage Interest Deduction Limit Lowered
The amount of mortgage interest that can be
deducted is now limited to the interest paid
on the fi rst $750,000 of a mortgage loan
amount. The new lower limit only applies to
mortgages issued after December 15, 2017.
Any mortgage outstanding prior to that date
will be held to the prior $1,000,000 limit.
Eliminated Deductibility of
Tax Preparer and Advisory Fees
As a way of simplifying the tax code and
offsetting some of the costs of the cuts, the
tax act eliminates the Miscellaneous Itemized
Deductions section of the tax code. The more
popular deductions in this section were the
deductibility of tax preparer and fi nancial
advisory fees.
Child Tax Credit Available to More People
The Child Tax Credit is doubling from $1,000
to $2,000 per child under the age of 17.
Additionally, more tax payers will be able to
qualify for the full amount of the credit since
the phaseout income limits is higher for single
parent fi lers $200,000 (up from $75,000 in
2017) and $400,00 for married couples (up
from $110,000 in 2017).
Spend 529 Accounts on
Elementary and Secondary School
Previously, distributions from 529 accounts
were tax free only when used to cover the
costs of higher education. Starting in 2018,
these funds can also be used to cover up
to $10,000 of public, private or religious
elementary or secondary school per year.
Affordable Care Act:
Mandate Gone, Tax Remains
The mandate to have every American carry
health insurance or pay a tax was removed.
While it would seem that the government
is losing money by no longer taxing the
uninsured, the government will actually save
hundreds of billions by no longer paying
subsidies to the millions of people that qualify
for them but don’t want health insurance.
The 3.8% tax on net investment income for
individuals with income over $200,000 and
couples with income over $250,000 remains.
Estate Tax Exemption Doubles
The estate tax exemption doubles from
5.49 million dollars to 10.98 million dollars.
This article is not intended as tax advice. Consult your tax professional regarding
how the new tax law impacts your personal fi nancial situation.
58
GILROY • MORGAN HILL • SAN MARTIN
APRIL/MAY 2018
gmhtoday.com