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Overview of the Tax Cuts and Jobs Act

Major tax reform that affects both individuals and businesses was enacted in December 2017. It’s commonly referred to as the Tax Cuts and Jobs Act (TCJA), or tax reform. The IRS estimates that they we will need to create or revise more than 400 taxpayer forms, instructions, and publications for the filing season starting in 2019. It’s more than double the number of forms they would create or revise in a typical year. 

Some of the most basic changes are:

Changes to Standard Deduction
The standard deduction is a dollar amount that reduces the amount of income on which you are taxed and varies according to your filing status. The standard deduction reduces the income subject to tax. The TCJA nearly doubled standard deductions. When you take the standard deduction, you can’t itemize deductions for mortgage interest, state taxes, and charitable deductions on Schedule A, Itemized Deductions.

Starting in 2018, the standard deduction for each filing status is:

  • Single: $12,000 (up from $6,350 in 2017)
  • Married filing jointly/ Qualifying widow(er): $24,000 (up from $12,700 in 2017)
  • Married filing separately: $12,000 (up from $6,350 in 2017)
  • Head of household: $18,000 (up from $9,350 in 2017)


The amounts are higher if you or your spouse are blind or over age 65. Most taxpayers have the choice of either taking a standard deduction or itemizing. If you qualify for the standard deduction and your standard deduction is more than your total itemized deductions, you should claim the standard deduction in most cases and don’t need to file a Schedule A, Itemized Deductions, with your tax return. 

What does this mean?
Many taxpayers will no longer itemize their deductions and have a simpler time in filing their taxes. For a list of deductible items that you may be able to itemize please see our Income Tax Organizer.

More than 9 out of 10 taxpayers use tax software or a paid preparer to file their taxes. You still need to compare your itemized deductions to see which one is best for you.

 Standard Deductions

Those who are married and filing jointly will now have an increased standard deduction of $24,000, compared to the $13,000 it would have been under the previous law.

Single taxpayers and those who are married and file separately now have a $12,000 standard deduction, compared to the $6,500 it previously would have been.

For heads of households, the deduction will be $18,000 compared to $9,550.

Personal Exemptions

The personal exemption has been eliminated with the tax reform bill.

Estate Tax

The estate exemption doubles to $11.2 million per individual and $22.4 million per couple in 2018.

Top Income Tax Rate

A new 37 percent top rate will affect individuals with incomes of $500,000 and higher. The top rate kicks in for married taxpayers who file jointly at $600,000 and up.

Child Tax Credit

The child tax credit has been raised to $2,000 per qualifying child (those who are under 17). A $500 credit is available for dependents who do not get the $2,000 credit.

Mortgage Interest

The deduction for interest is capped at $750,000 for mortgage loan balances taken out after Dec. 15 of last year. The limit is still $1 million for mortgages that were established prior to Dec. 15, 2017.

State and Local Taxes

The itemized deduction is limited to $10,000 for both income and property taxes paid during the year.

Contribution Limits for Retirement Savings

Employees who participate in certain retirement plans ‒ 401(k), 403(b), most 457 plans, and the Thrift Savings Plan – can now contribute as much as $18,500 this year.

Savings in IRAs

Savers who contribute to individual retirement accounts will have higher income ranges following cost-of-living adjustments. Note that the deduction phases out for individuals and their spouses who are covered by workplace retirement plans.

For single taxpayers, the limit will be $63,000 to $73,000.

For married couples, the phase-out range will vary depending on whether the IRA contributor is covered by a workplace retirement plan or not. When the spouse who is investing has access to an employer plan, the range is $101,000-$121,000. For individuals who don't have a retirement plan but are married to someone who does, the phase-out has been raised to $189,000- $199,000.

The phase-out was not adjusted for married individuals who file a separate return and who are covered by a workplace retirement plan. That range is $0 to $10,000.

Contributions to Roth IRAs

For individuals who are single or the heads of their households, the income phase-out has been raised to $120,000 to $135,000. For married couples who file jointly, the range climbs to $189,000 to $199,000.

The phase-out was not adjusted for married individuals who file a separate return. That is $0 to $10,000.