There are many changes resulting from the new tax reform bill. Here is a quick rundown of some of the most important changes:

For the Individual

  1. Tax brackets – the top bracket was lowered from 39.6% to 37%. The other tax brackets saw similar reductions

    1. Marriage penalty returns – if you are in the top tax bracket if married and filing joint, filing separate returns may result in lower overall taxes

  2. Standard deduction – nearly doubled for both single and joint filers

  3. Itemized deductions – limitation of overall allowable deductions was removed

    1. Many deductions were repealed

    2. State and local taxes – deductible up to only $10,000. This used to be unlimited and is thus one of the more controversial parts of the bill

  4. Personal exemptions – repealed. These were $4,050 for each person on the tax return

  5. Filing requirement – one must file if their income exceeds the standard deduction. The rule used to be a combination of the personal exemptions and standard deduction

    1. This will likely result in many more foreign nationals needing to file due to short stays in the U.S.

  6. Obamacare penalty – reduced to $0

    1. Obamacare additional Medicare tax of 0.9% was not repealed or reduced

  7. Child tax credit – increased to $2,000 for each child

  8. Alimony – no longer taxable to the recipient or deductible by the payer (sorry divorcees)

Note that most of these changes sunset, or go away, after 2025 due to compliance with the Byrd rules

See this article for a deeper dive into the implications for the individual


Pass-through Entities

  1. Deduction of up to 20% of pass-through income. All income used to be taxed at the owner’s personal tax rate so this could be a big boon for pass-through owners

    1. The income must be “qualified” income in order to be deductible; thus, the deduction may be harder to claim than most think

    2. Only those with income under $157,500 if single and double that if filing joint can claim the deduction


  1. Tax rate – flat rate of 21%. This used to be a graduated tax with a top rate of 35%

  2. AMT – repealed. Note that the individual AMT is still in effect

  3. Dividend received reduction – slightly reduced

International Implications

  1. Tax system – now territorial. The U.S. used to be worldwide

    1. This change is what will end the deferral of taxes. Apple and Google are two prime examples of corporations using the deferral

  2. Repatriation tax – one-time tax, payable over 8 years on any deferred income

    1. 8% rate on non-cash items. 15.5% on “cash”

  3. Dividend received deduction – 100% deduction for 10% owned foreign corporations (owned by US shareholders)

Would you like to read more on tax reform? Then visit here and here.