Some Highlights of the Tax Cuts & Jobs Act for Individuals

Yes, we know the standard deduction has doubled, the personal exemption is gone, and tax rates for corporations have decreased. But what about all the other stuff buried within those 500+ pages of tax law? Here are some provisions for individuals, some of which have become common to many taxpayers such an unreimbursed employee expenses.

Did you Know: The reason that many of the individual provisions expire on Dec. 31, 2025 is due to the Byrd rule, which states Senators are to stop legislation if it has the potential of significantly increasing the federal deficit beyond a 10-year period.

  • Contributions to 529 plans for “qualified higher education” include tuition at an elementary or secondary public, private, or religious school, up to a $10,000 limit per tax year. This appears to be permanent.
  • Unreimbursed employee business expenses are no longer deductible. So if you incur a lot of expenses for your job that are not reimbursed by your employer, no tax deduction applies. This expires Dec. 31, 2025.
  •  More middle-income taxpayers will be eligible for the Child Tax Credit due to the higher phase-out which begins at $400,000 MFJ and $200,000 Single taxpayers.
  •  Child Tax Credit continues to apply to dependents until 17, however dependents older & non-child dependents, may be eligible for $500 non-refundable credit. This expires Dec. 31, 2025.
  •  Moving Expenses reimbursed by the employer are no longer excluded from gross income, except for Members of the Armed Forces. This expires Dec. 31, 2025.
  •  Moving expense deduction is eliminated, except for Members of the Armed Forces. So if you move more than 50 miles for work, this is no longer tax deductible. This expires Dec. 31, 2025.
  • Alimony is no longer a deduction for the payor for divorce or separation agreements dated after Dec. 31, 2018. The receiving ex-spouse does not include alimony as income. Rather the paying ex-spouse is taxed at their applicable rates for alimony.
  • Capital gains remain much the same.
  • Re-characterization to undo a contribution to a Roth IRA is no longer possible.
  • Inflation will be calculated using the chained CPI-U (Consumer Price Index for all urban customers). In theory, the chained CPI grows at a slower pace because it takes into account a consumer’s ability to substitute between goods in response to changes in relative prices. This is permanent.

And many, many more provisions are included, some of what maybe haven’t gotten read yet. I particularly like that Members of Congress cannot deduct living expenses when they are away from home. Previously, they were allowed to deduct up to $3,000 of living expenses when they were away from home (such as expenses connected with maintaining a residence in Washington, D.C.) in any tax year.

Friday, I will discuss business changes in the tax reform that affect small business owners.

As always, thank-you for reading my blog.