It appears that the House and Senate have been able to meld their versions of the tax overhaul bill. This should be put to a vote sometime today and sent to the President's desk sometime tomorrow.
Changes to expect:
Please be aware that none of the changes are retroactive to 2017 and will take effect for the tax filing year of 2018.
It appears that most taxpayers should find a benefit to their tax bill. The people who are not likely to see a benefit will be those that live in states where there are high state and local income taxes and/or high real estate taxes, similar to DC, MD and VA. (The current version of the combined bills limits those deductions to $10k a year in total.)
- The new law will also eliminate personal exemptions and many expenses will no longer be deductible, such as moving expenses, casualty losses, tax preparation services, work related expenses, etc. In exchange for losing these exemptions, the standard deduction which is currently $6,350 for individuals and $12,500 for married couples will almost double.
- Because of the loss of personal exemptions and the limitation on state and local income and real property taxes, some families and individuals will not see a reduction in their overall income taxes, but may actually see an increase. Though the higher child care and dependent care credit may be helpful to many, especially those with many kids.
- There will now be 7 tax brackets, which are generally lower than current income tax brackets. However, unless extended, these brackets expire in 2025 and return back to our current rates.
- The new 21% corporate tax rate will be permanent.
- The exemption for gift, estate and generation-skipping transfer taxes will double, to just over 11 million dollars per person in 2019. The provisions regarding estate taxes seem to be changing almost daily.
- Good news for participants in 401k and 403b or government savings plan is that the contribution limit rises $500 in 2018 to $18,500 ($24,500 if you are 50 or older). So take advantage and contribute more and lower taxes by increasing your contribution rate.
I recommend that you speak with your accountant and estate planning attorney as soon as you can after the new tax law becomes effective. Most accountants and experts are not recommending prepaying state and local taxes for 2018 (or later years).
This is a good article about the latest changes to the tax bill: https://taxfoundation.org/conference-report-tax-cuts-and-jobs-act/