New tax laws
There have been several significant changes to tax laws in recent years. Here are some of the most notable ones:
Tax Cuts and Jobs Act (2017)
- Reduced corporate tax rate from 35% to 21%
- Doubled the standard deduction for individuals and families
- Limited state and local tax (SALT) deductions to $10,000
- Repealed the individual mandate penalty under the Affordable Care Act
- Created a new 20% deduction for qualified business income (QBI) from pass-through entities
Tax Reform and Jobs Act (2020)
- Extended the 20% QBI deduction for qualified business income from pass-through entities
- Increased the child tax credit from $1,000 to $2,000 per child
- Made permanent the individual tax cuts from the 2017 Tax Cuts and Jobs Act
- Created a new 5% tax rate for qualified small business income (QSBI) from pass-through entities
Other notable tax law changes
- Section 179 expensing: The Tax Cuts and Jobs Act increased the Section 179 expensing limit from $500,000 to $1 million, and increased the phase-out threshold from $2 million to $2.5 million.
- Alimony: The Tax Cuts and Jobs Act repealed the alimony deduction for taxpayers who are divorced or separated after December 31, 2018.
- Mortgage interest: The Tax Cuts and Jobs Act limited the mortgage interest deduction to interest on mortgages up to $750,000 (down from $1 million).
- Charitable contributions: The Tax Cuts and Jobs Act increased the limit on cash charitable contributions from 50% to 60% of adjusted gross income (AGI).
- 529 plans: The Tax Cuts and Jobs Act expanded the use of 529 plans to cover qualified education expenses, including K-12 tuition and apprenticeship programs.
- Estate and gift tax: The Tax Cuts and Jobs Act doubled the estate and gift tax exemption from $5 million to $10 million (indexed for inflation).
Upcoming tax law changes
- 2022: The Inflation Reduction Act of 2022 increased the top marginal income tax rate from 37% to 39.6% for individuals earning over $450,000 (single) or $600,000 (joint).
- 2023: The Secure Act 2.0 increased the required minimum distribution (RMD) age from 72 to 73, and expanded the Saver's Credit for low- and moderate-income workers.
Please note that tax laws are subject to change, and it's always a good idea to consult with a tax professional or financial advisor to ensure you're taking advantage of all the tax benefits available to you.