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Highlights of the new tax code for 2018

Marie Havenga • Dec 29, 2017 at 2:00 PM

The new tax bill, which includes $1.5 trillion in tax cuts, is a monstrous mound of papers, but here are some highlights that may affect you:

— New personal income tax rates: The bill retains the current number of brackets, but changes them to 10, 12, 22, 24, 32, 35 and 37 percent. The top bracket for wealthiest earners, 39.6 percent under current law, decreases to 37 percent. But it will kick in at a lower level: $600,000 per married couple, instead of the current $1 million. These reductions are temporary, though, ending in 2026.

— Standard deduction: Currently $6,350 for individuals and $12,700 for married couples, the bill nearly doubles those levels to $12,000 for individuals and $24,000 for couples. The changes expire in 2026.

— Personal exemption: The bill ends the current $4,050 personal exemption.

— State and local taxes: Ends the unlimited federal deduction for state and local income and sales taxes, allowing the deduction only for a total of up to $10,000 in combined property, income or sales taxes.

— Tax credits: Doubles per-child tax credit to $2,000 for families making up to $400,000 a year. Up to $1,400 of the $2,000 credit is available as a tax refund to lower- and middle-income families. The child credit expires in 2026. The bill also provides a tax credit for dependent care for children and older dependents.

— Home mortgage interest deduction: Limits the deduction to interest paid on the first $750,000 of a new loan for a first or second home, down from the current $1 million limit.

— Other deductions: Allows deduction for medical expenses not covered by insurance for 2018 and 2019 if your expenses exceed 7.5 percent of adjusted gross income. This rises to 10 percent starting in 2020.

— Individual insurance mandate: Repeals the requirement that people pay a tax penalty if they don't purchase health insurance.

— Alaska oil drilling: The new bill allows oil and gas drilling in Alaska's Arctic National Wildlife Refuge.

— Alternative minimum tax: The AMT is aimed at ensuring that higher-earning people and corporations pay at least some tax. For individuals, the new bill increases the amount that can be exempted from the AMT. The tax is repealed for corporations.

— Inheritance tax: Currently, when someone dies, the estate owes taxes on the value of assets transferred to heirs above $5.5 million for individuals or $11 million for couples. The bill doubles those limits, but only through 2025.

— Corporate taxes: The new rules slash the current 35 percent rate to 21 percent.

— Pass-through businesses: Millions of small-business owners "pass through" their income, then pay personal income tax on those earnings, not corporate tax. The bill lets those people deduct 20 percent of the first $315,000 of earnings.

— Businesses: The new rules allow companies to immediately write off the full cost of equipment.

— Multinational corporations: The bill ends tax advantages for companies moving overseas.

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