The impact of the latest tax reform on individual taxpayers

The Impact of Recent Tax Reform on Individual Taxpayers

The Tax Cuts and Jobs Act of 2017 is the most significant overhaul of the U.S. tax system in decades. Many of these changes will have a significant and lasting impact on individual taxpayers.

Individual Tax Rates

One of the most impactful changes for individual taxpayers is the decrease in tax rates. The new law reduces the seven tax brackets from 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% to 10%, 12%, 22%, 24%, 32%, 35%, and 37%. For most taxpayers, this reduces the amount of taxes owed.

Increasing Standard Deduction

The standard deduction is being nearly doubled from $6,350 to $12,000 for single filers, and $12,700 to $24,000 for couples filing jointly. This makes it easier for taxpayers to reduce their taxable income, as they no longer need to itemize deductions to do so.

Changes to Itemized Deductions

There are also several changes to itemized deductions. These include:

• • Mortgage Interest Deduction: The amount of mortgage interest that is deductible is lowered from $1 million to $750,000.

• • State and Local Tax Deduction: State and local tax deduction is capped at $10,000.

• • Medical Expense Deduction: Medical expenses that exceed 7.5% of adjusted gross income are deductible.

• • Charitable Deduction: Taxpayers can now deduct up to 60% of their adjusted gross income in charitable contributions.

Conclusion

The recent tax reform has had a significant impact on individual taxpayers. From lower tax rates to changes in itemized deductions, the law will affect how much individual taxpayers owe in taxes.