More on the proposed tax law changes

More details are indentified with today’s tax reform proposals. They include:

• the current personal exemption of $4,050 per taxpayer disappears.
• the real property tax deduction continues, but is limited to $10,000 per year.
• the state and local tax (SALT) deduction disappears; preserving the real property tax deduction was viewed as a compromise trade-off for the elimination of the SALT deduction.
• confirming the home mortgage interest deduction is preserved, but it is interest only on the first $500,000 of the mortgage debt (that is down from the current $1.0 million mortgage balance.)
• other disappearing tax deductions include: medical expenses, tax preparation fees, alimony payments, student loan interest payments, and moving expenses for employment purposes.
• while the child credit increases from $1,000 to $1,600, the additional $600 is not refundable to low income earners.
• a ‘new’ $300 tax credit is available for ‘non-child’ dependents, e.g adult children being supported or elderly parents.
• the $5,000 dependent care assistance account in Flexible Spending Accounts disappears.
• standard deductions, as referenced earlier, pretty much are doubled: single persons, going from $6,350 to $12,000, and for married couples, going from $12,700 to $24,000 per year.
• 401(k) contribution limits were left untouched.

Tax rates on taxable income are proposed to be:

• 12% on first $45,000
• 25% on $45,000 up to $200,000 for single taxpayers, 25% up to $90,000 for married taxpayers
• 35% on $200,00+ for single taxpayers, 35% on $260,000+ for married taxpayers
• 39.6% on $500,000+ for single taxpayers, 39.6% on $1.0+ million on married taxpayers