Proyecto de ley de reforma tributaria aprobado: Esto es lo que significa para ti

Updated December 22, 2017: Today, the President signed the tax reform bill into law. Remember, for most people, the bill doesn’t affect their 2017 taxes (those they file in 2018). Check back on the TurboTax Blog, as we’ll continue to keep you up to date with the latest tax news.

Today, Congress passed the largest tax reform in more than three decades. The bill will affect the taxes of most taxpayers, but a key point to keep in mind is that, for most people, the bill does not affect their 2017 taxes (those who file in 2018).

If you’re wondering how this affects you, don’t worry, we’ve got your back. We’re working to ensure our products are up-to-date so you can use them to file your taxes with complete confidence.

That said, many people are wondering what the bill includes and how it might affect them. Here’s a summary of some of the new bill’s key tax provisions and how they might affect you.

Lower tax rates and modified income ranges

The bill retains the seven tax brackets found in the current law, but reduces some of the tax rates. It also changes the income thresholds to which the rates apply.

The current categories are : 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.

The new supports will be as follows: 10%, 12%, 22%, 24%, 32%, 35% and 37%

The income limits at which these categories apply have also changed.

For married taxpayers filing jointly :

For single taxpayers :

Increase in alternative minimum tax exemptions

The bill also eases the burden of the individual Alternative Minimum Tax (AMT) by increasing the exempt income from $84,500 (adjusted for inflation) to $109,400 for married couples filing jointly and from $54,300 (adjusted for inflation) to $70,300 for single taxpayers, so fewer taxpayers will have to pay it.

Tax relief for individuals and families

Increase in the standard deduction:

The new tax law nearly doubles the standard deduction. Standard deductions for single taxpayers will increase from $6,350 for 2017 taxes to $12,000 for 2018 taxes (those you file in 2019). Married couples filing jointly will see an increase from $12,700 to $24,000. These increases mean that fewer people will have to itemize their deductions. Currently, approximately 30% of taxpayers itemize their deductions. Under the new law, this percentage is expected to decrease.

Increase in the Child Tax Credit:

For families with children, the Child Tax Credit doubles from $1,000 to $2,000 per child. Additionally, the refundable amount increases from $1,100 to $1,400. The bill also adds a new non-refundable $500 credit for non-child dependents. Finally, it increases the income threshold at which these benefits phase out from $110,000 for a married couple to $400,000.

Eliminations or reductions in deductions

Personal and dependent exemptions:

The bill eliminates the personal and dependent exemptions, which are currently $4,050 for 2017 and were expected to increase to $4,150 in 2018.

State and local taxes/home mortgages:

The bill limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes were fully deductible.

The bill also limits the amount of mortgage debt on new home purchases on which interest can be deducted to $750,000, up from $1,000,000 under current law.

Health care:

The bill eliminates the tax penalty for not having health insurance. It also temporarily reduces the threshold above which extraordinary medical expenses can be deducted from the current statutory threshold of 10% to 7.5% for 2017 and 2018, so that for 2017 and 2018, you can deduct medical expenses exceeding 7.5% of your adjusted gross income instead of the higher 10%.

Self-employed workers and small businesses:

The bill includes a host of changes for businesses. The biggest changes include a reduction in the top corporate rate to 21%, a new 20% deduction for income from certain types of “pass-through” entities (partnerships, S corporations, sole proprietorships), limits on interest expense on loans, nearly doubling the amount small businesses can expense from the 2017 Section 179 amount of $510,000 to $1,000,000, and eliminating the corporate alternative minimum tax (AMT).

Don’t worry about memorizing these tax changes, most of which are for the 2018 taxes you’re filing in 2019.  TurboTax takes care of everything and will be up to date with the latest tax laws.

If you have any questions while preparing your tax return, you can connect live via one-way video with a bilingual TurboTax Live Enrolled Agent or CPA to clarify them and review your return so you can sign and file it.