Hurray! Another tax season has come and gone. But wait… here’s some more tax information to ponder. When it passed in 2017, the Tax Cuts and Jobs Act (TCJA) was the largest overhaul to the U.S. tax code in decades. The clock is now ticking on the law’s many temporary provisions, which are scheduled to sunset at the end of 2025 unless Congress intervenes. Here is a summary of the most important changes.
- Some good news: For those who want to itemize deductions, the state and local tax deduction will no longer be capped at $10,000, restrictions on the mortgage and home equity line of credit interest deduction are loosened, and miscellaneous itemized deductions return. Additionally, most taxpayers will again get to claim a $4,050 personal exemption.
- But mostly bad news: Income tax rates will increase by about 3% for the average taxpayer, the standard deduction will drop in half, and the child tax credit will drop from $2,000 to $1,000 and be subject to much lower income phaseouts. The lifetime gift and estate tax exemption – currently $13.6 million per person – also drops in half, which could result in substantial estate/gift tax for high net worth individuals. Additionally, the Qualified Business Income (QBI) Tax Deduction, which allows certain small businesses a 20% income tax deduction, will be eliminated.
Click the following link for more details:
https://www.northwesternmutual.com/life-and-money/11-big-tax-changes-on-the-horizon/