The GOP has settled on a final tax bill. Representing a major tax-overhaul, the bill makes significant changes to the federal income tax brackets and deductions. Let's look at both, starting with the 2018 income tax brackets.
2018 Income Tax Brackets
The number of brackets remained the same at seven. Rates overall, however, have come down. For individuals, these lower rates are scheduled to expire in 2025 unless Congress extends them.
The top rate will fall from 39.6% to 37%. The bottom rate remains at 10%, but it covers twice the amount of income compared to the previous brackets.
2018 Standard Deduction and Exemptions
The new tax rules also make big changes to the standard deduction and exemptions.
It currently sits at $1,000 and starts to phase out at $110,000 in income for couples and $75,000 in income for everybody else. Under the new law, the credit doubles to $2,000, $1,400 of which is a refundable tax credit. Further, it doesn't start to phase out until $400,000 in income for couples and $200,000 for singles.
2018 Itemized Deductions
Several key changes are coming for itemized deductions. State and local taxes can still be itemized, but they are now capped at $10,000. This concession attempts to address the uproar from states that levy big taxes on their citizens.
Interest on mortgages for primary and secondary residences is still deductible. The limit, however, has come down from loans up to $1 million to loans up to $750,000.
Medical expenses in 2017 and 2018 are deductible to the extent the exceed 7.5% of income (down from 10%).
Courtesy Forbes.com, Rob Berger