Tax Reform 101 for Families

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The new tax reform law that was signed into law on December 22, 2017, changed taxes for the majority of taxpayers beginning in tax year 2018(the taxes you file in 2019).

How Are Families Impacted?

The following infographic provides a glimpse at the impact for a typical family of four before and after the tax changes are applied. You can also check out additional infographics which will give you an example of tax law changes based on various scenarios.

Below are also some of the changes to the tax law that may impact you.

1. Lower Tax Rates: 7 tax rates under the new law: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Here is the tax rate schedule for joint filers:

2. Standard Deduction Increased: The standard deduction is increased to $24,000 married filing jointly, $18,000 head of household and $12,000 for single or married filing separately. 65 or over, blind, or disabled claiming single or head of household will get an additional $1,600 standard deduction and married filing jointly will get an additional $1,300.

3. Personal and Dependent Exemption Eliminated: The personal and dependent exemption of 4,050 per dependent in 2017 was eliminated .

4. Child Tax Credit: The Child Tax Credit for children under 17 years old is doubled from $1,000 to $2,000. $1,400 of the tax credit is refundable, which means you can still get a $1,400 credit even when you have no tax liability. The income levels when the credit phases out are increased to $400,000 for joint filers and $200,000 for others.

  • A new $500 tax credit is available for dependents who are not your children.
  • A Social Security number for the dependent is required to receive the tax credit.

5. State and Local Tax Deduction: The new tax law limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes have generally been fully tax deductible.

6. Mortgage & Home Equity Debt: The new law also caps the amount of mortgage indebtedness on new home purchases on which interest can be deducted at $750,000 down from $1,000,000 in current law if you already own a home.

The tax deduction for interest paid on home equity loans and lines of credit used to buy, build or substantially improve the taxpayer’s home secured by their home loan is still tax deductible, but interest paid on the same loan used for personal living expenses like paying off credit card debt is no longer tax deductible.

7. Tax Deductions That Are Going Away:

  • Moving expenses, except for members of the Armed Forces on active duty.
  • Miscellaneous itemized deductions subject to the 2% income limit, such as job expenses and investment expenses.
  • Personal casualty and theft losses, unless they are declared a federal disaster.

8. Alimony: For divorce or separation agreements executed after December 31, 2018, alimony and separate maintenance payments are not tax deductible by the payer and not included in the income of the recipient. This was not the case under prior law.

9. Health Care:  The tax law eliminates the tax penalty for not having health insurance beginning in 2019.  The law also allows you deduct medical expenses that are more than 7.5% of your adjusted gross income as opposed to the higher 10% if you can claim itemized tax deductions.

What Should You Do Next? 

TurboTax has you covered and will be up to date with the latest tax laws. TurboTax will ask you simple questions and give you the tax deductions and credits you’re eligible for based on your entries.

If you questions, you can connect live via one-way video to a TurboTax Live CPA or Enrolled Agent to get your tax questions answered at tax-time. A TurboTax Live CPA or Enrolled Agent can also review, sign, and file your tax return.

You can also check out TurboTax TaxCaster to get a side-by-side comparison of how the tax law changes impact you.

Check back with the TurboTax blog Tax Reform Center Hub or with the TurboTax Tax Reform Center for more updates on tax law changes.

Comments (13) Leave your comment

  1. The above comments are incorrect for 2018. below are the requirements for the Child Tax Credit:Age test
    To qualify, a child must have been under age 17 (i.e., 16 years old or younger) at the end of the tax year for which you claim the credit.
    2.Relationship test
    The child must be your own child, a stepchild, or a foster child placed with you by a court or authorized agency. An adopted child is always treated as your own child. (“An adopted child” includes a child lawfully placed with you for legal adoption, even if that adoption is not final by the end of the tax year.)You can also claim your brother or sister, stepbrother, stepsister. And you can claim descendants of any of these qualifying people—such as your nieces, nephews and grandchildren—if they meet all the other tests.
    3.Support test
    To qualify, the child cannot have provided more than half of his or her own financial support during the tax year.
    4.Dependent test
    You must claim the child as a dependent on your tax return.Bear in mind that in order for you to claim a child as a dependent, he or she must: 1) be your child (or adoptive or foster child), sibling, niece, nephew or grandchild; 2) be under age 19, or under age 24 and a fulltime student for at least five months of the year; or be permanently disabled, regardless of age; 3) have lived with you for more than half the year; and 4) have provided no more than half his or her own support for the year.
    5.Citizenship test
    The child must be a U.S. citizen, a U.S. national or a U.S. resident alien. (For tax purposes, the term “U.S. national” refers to individuals who were born in American Samoa or in the Commonwealth of the Northern Mariana Islands.)
    6.Residence test
    The child must have lived with you for more than half of the tax year for which you claim the credit. There are important exceptions, however: A child who was born (or died) during the tax year is considered to have lived with you for the entire year.Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military services or detention in a juvenile facility, are counted as time the child lived with you. (There are also some exceptions to the residency test for children of divorced or separated parents. For details, see the instructions for Form 1040, lines 51 and 6c, or Form 1040A, lines 33 and 6c.)
    7.Family income test
    The child tax credit is reduced if your modified adjusted gross income (MAGI) is above certain amounts, which are determined by your tax-filing status. In 2017, the phase out threshold is $55,000 for married couples filing separately; $75,000 for single, head of household, and qualifying widow or widower filers; and $110,000 for married couples filing jointly. For each $1,000 of income above the threshold, your available child tax credit is reduced by $50

    1. As long as he is born by 11:59 pm on New year’s Eve, you can claim him… If you are still pregnant when the ball drops….you can till the next year’s filing

    2. Yes. According to schedule EIC,
      “If the child was born or died in 2017 and your home was the child’s home for more than half the time he or she was alive
      during 2017, enter 12.”
      This means that even if your child was born at 11:50 PM on Dec 31, you still get to claim them as a dependent for the entire year.

    3. My son was born December 31. We were able to claim him on the taxes for the year he was born, even though he was born on the last day of the year.

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