Recap of the Tax Cuts and Jobs Act

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Congress has now passed tax reform legislation. Let’s look at how this legislation could affect you.

Tax brackets reduced across the board

The new tax brackets are: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
The 37% bracket affects married people filing jointly, earning $600,000 in income, or single taxpayers earning $500,000 or more.
 
New tax brackets
Tax Bracket - Full

Increased standard deduction; repeal of personal exemptions


Personal exemptions are suspended through 2025. These exemptions, previously allowed as an offset to AGI for the taxpayer, his or her spouse and dependents (but subject to phase-out rules for high-income earners), were $4,050 per person in 2017.
The standard deduction has nearly doubled, jumping to $12,000 for single taxpayers, and $24,000 for married couples filing jointly. This change benefits taxpayers who have not historically itemized their deductions, or whose itemized deductions have been less than this increased standard deduction amount.
New standard deductions
Standard Deductionp - Full
 

Fewer itemized deductions


Under the legislation, itemized deductions for state and local income, sales and property taxes are limited to $10,000. The cap on these deductions may increase taxes for taxpayers living in states with higher state-level income taxes or high property taxes. Many other itemized deductions have been eliminated—including the deductions for tax preparation fees and investment management fees. The phase-out rule that limited itemized deductions for high-income taxpayers has also been repealed. The medical deduction adjusted gross income floor has been reduced from 10% to 7.5% for all taxpayers for tax years 2017 and 2018.
 
Home mortgage interest deductions have been capped at $750,000, down from the old cap of $1 million. A deduction for home mortgage interest is also now limited to acquisition debt (suspending the deduction for home equity loans).
 
The charitable donation deduction has been largely retained. In fact, contributions of cash to a public charity can now be deducted up to 60% of the taxpayer’s AGI (up from 50%). However, charitable contributions are now denied for payments made in exchange for college athletic event seating rights.
 
Home mortgage interest deductions
Mortgage cap
 

Changes to gift and estate taxes


Gift and estate taxes remain, but the per-person exemption doubled to $11.2 million per person. The increased (doubled) exemption amount will continue to increase with inflation each year. Following 2025, the exemption is scheduled to return to the prior exemption, as then indexed for inflation.

New estate tax exemption
Estate Tax

Additional information
 

For additional insights from TIAA investment experts, see Tax reform investment implications: How much bang for the bucks?

How your TIAA advisor can help


Taxes have a significant impact on how much you can save and how much you will have in retirement. While we don’t provide individual tax advice, our TIAA advisors can help educate you on the latest changes, and can participate in conversations with you and your tax professional regarding your financial situation.
 
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This material is for general informational purposes only. It is not intended to be used, and cannot be used, as a substitute for specific individualized legal or tax advice. Additionally, any tax information provided is not intended to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties. Tax and other laws are subject to change, either prospectively or retroactively. Individuals should consult with a qualified independent tax advisor, CPA and/or attorney for specific advice based on the individual’s personal circumstances. Examples included in this presentation, if any, are hypothetical and for illustrative purposes only.
 
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