After much speculation and anticipation, the “Tax Cuts and Jobs Act” was passed into law on December 22nd, 2017. This law will affect your 2018 return, which will be filed in 2019.
Lets begin with the new tax brackets.There are still seven tax brackets, however all but two tax bracket have experienced a reduction in the marginal tax rate. The marginal tax rate reduction averages to be about 2% over the seven brackets. The middle tax bracket (now 24%) experienced the largest reduction by 4%. Below are the specific changes:
39.6% was reduced to 37%
35% remained unchanged
33% was reduced to 32%
28% was reduced to 24%
25% was reduced to 22%
15% was reduced to 12%
10% remained unchanged
The penalty associated with the Affordable Care Act’s individual mandate has been removed as well. However, this not occur until 2019. Therefore, you will still be penalized for not having health insurance on your 2017 and 2018 tax return.
Our articles are not intended to be tax advice. To seek tax advice regarding your specific tax situation, it is best practice to consult with a Certified Public Accountant.