The most notable change is in the marginal rates, or the brackets if you are so inclined to call them as such. For 2017, the rates were 10%, 15%, 25%, 28%, 33%, 35% & 39.6% at the top. This year, they have been changed to 10%, 12%, 22%, 24%, 32%, 35% & 37% – reduced across the board except for the lowest rate. Additionally, the marriage penalty has truly been eliminated up to taxable income of $400,000, when the 35% rate kicks in. For married couples filing jointly, the top rate of 37% starts at any taxable income over $600,000 versus $500,000 for a single filer.

The next change is that the standard deduction has been, in essence, doubled. Last year, the amounts were 6350, 9350 or 12700 depending on filing status. This year it was changed to 12000, 18000, or 24000 depending on filing status. There is a noticeable BUT to this – personal exemptions have been eliminated, so people with multiple dependents have in essence been hosed a little.

To assist families with offsetting the loss of the exemptions, the child tax credit was doubled from $1000 to $2000, but only $1400 of that $2000 is considered a refundable credit. There is also a new dependent credit (for a child over 16, or other adult dependent) that will be $500.

The most drastic changes happen when it comes to income adjustments and itemizing deductions. The fact that the standard deduction increasing makes it more difficult to itemize deductions, but the entire schedule A itself went under a major revamp. For example, the following itemized deductions and income adjustments are still present or improved:

1. Educator expenses – for teachers that spend out of pocket to buy classroom supplies (capped at $250)
2. IRA contributions
3. Health Savings Account contributions
4. Student Loan Interest Deduction
5. Charitable contributions – this has been improved slightly as the limit has been increased to 60% of AGI
6. Miscellaneous deductions not subject to the 2% AGI floor:

   • Amortizable premium on taxable bonds.

   • Casualty and theft losses from income-producing property.

   • Federal estate tax on income in respect of a decedent.

   • Gambling losses up to the amount of gambling winnings .

   • Impairment-related work expenses of persons with disabilities.

   • Loss from other activities from Schedule K-1 (Form 1065-B), box 2.

   • Losses from Ponzi-type investment schemes.

   • Repayments of more than $3,000 under a claim of right.

   • Unrecovered investment in an annuity.

The following adjustments and deductions are still allowed, but have been limited in some way

1. Moving expenses – can only be taken by active duty military personnel.
2. Medical expenses – only those expenses in excess of 7.5% of AGI for 2018 returns (floor jumps to 10% for 2019)
3. State & Local Taxed paid (Property Taxes, State & local income taxes paid during the year, etc.) – Capped at $10000 ($5000 if MFS)
4. Mortgage Interest – For any loans originated during 2018 and onward – Interest limited to the first $750000 of principal (prior to this it was on the first $1000000)
5. Home Equity line of credit interest – deductible if used to improve the property. Paying off other stuff, previously an AMT adjustment, now makes this interest non-deductible.
6. Casualty Losses – Now only applies to federally declared disasters and subject to the same rules.

Finally, these items have been ELIMINATED :

1. Alimony paid (starting Jan 1st 2019)
2. All employee business expenses (union dues, uniforms, travel, meals, mileage, etc.)
3. All other deductions subject to the 2% AGI floor (tax prep fees, losses on deposits or IRA’s, safe deposit box bees)

Will your return be simpler? The answer is maybe . Everyone will file a form 1040 this time around (no A or EZ forms anymore), and the form was shortened. However, certain items that would normally be on the form now require additional schedules.Have student loan interest or self employment income? That’s a schedule. Owe AMT? That’s another schedule. Pay for childcare? You guessed it. Self employed? Yep, that’s one too. Made estimated payments? You get the picture.

Finally, do you have an Obamacare policy you want to get rid of? I hope you waited until now to do so. For 2018 returns, the individual responsibility payment is still in effect which is either the flat rate ($695 per adult + $347.50 per child under 18) or 2.5% of household income above the filing threshold, whichever is greater, capped at the average cost of a bronze level plan.

Effective for 2019 returns, the individual responsibility payment has been reduced to $0.