Recently, Congress passed a new tax reform bill. Analysts at Ameriprise Financial have identified some areas that may affect taxpayers now and in the future.
The law reduces tax rates and adjusts income brackets for taxpayers, including individual filers and married couples filing jointly. However, the number of individual tax brackets remains at seven. The number of estate and trust brackets is reduced from five to four brackets, also with slightly lower rates. These changes do not affect the special tax rates or tax brackets for long-term capital gains and qualified dividends.
The new tax rates and brackets apply from 2018 through 2025.
|2018 Filing Status & Taxable Income Range|
|Tax Rate||Single||Married Filing Jointly & Surviving Spouse||Married Filing Separate||Head of Household||Trust|
The new law nearly doubles the standard income tax deduction for individuals to $12,000 (up from $6,350 in 2017), and to $24,000 (up from $12,700 in 2017) for married couples filing jointly. For taxpayers who have previously itemized their deductions, the increased standard deduction – as well as changes to itemized deductions – may make itemizing less attractive in 2018 for some.
Taxpayers should consider the impact of changes to itemized deductions made in the new law. These changes are in effect from 2018 through 2025.
Under the new bill, personal exemptions are eliminated for 2018 through 2025. However, during the same time, the child tax credit will be increased to $2,000 per qualifying child with a $500 credit for qualifying dependents other than qualifying children.
Contact your tax advisor if you have questions about the new legislation, and how it could affect you, and see your financial advisor. Though your Ameriprise financial advisor cannot provide specific tax advice, they can support your tax advisor and help you understand the general impacts of the proposed legislation, or refer you to a tax advisor if you don’t already work with one.
Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific issues.
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