The horse-trading is over (we think), and it looks like the House and Senate versions of tax reform have been blended, and the result is headed back to both houses for a final vote. And, while anything could still happen, it looks like this version has a pretty good chance to become law. So, what changed since last week?
The deduction for medical expenses is not going away, after all! Expenses over 7.5% of AGI can be deducted. After 2020, the threshold becomes 10%.
And deductions for state and local taxes, targeted for extinction under prior versions, is partially resurrected, up to $10,000. Between income taxes and real estate taxes, that seems like an unrealistically low limit in NY, but I guess it'‘s better than $0.
Mortgage interest (on existing loans up to $1 million) remains deductible The crackdown: for new mortgage loans up to $750,000, on first or second homes, interest is deductible.
Home equity interest, however, will no longer be deductible.
The $4,050 per person personal exemption will be eliminated. Ouch! But this is supposed to be offset by a much higher standard deduction, now raised to $24,000 from today's $12,700 for a married couple. If that $24,000 is more than the amount of your itemized deductions and personal exemptions in prior years, you win! If not, not so much.
Student loan interest, up to $2,500, remains deductible.
The child credit will double, from $1,000 to $2,000, and up to $1,400 of that is refundable
Teachers can continue to deduct up to $250 paid for classroom supplies.
Good new for graduate students: tuition waivers will not become taxable income!
The adoption tax credit was supposed to be eliminated, but it lives on in the latest version. Up to $13,570 is available, subject to phase out for higher income taxpayers.
Those are the highlights. As we digest the 500+ page legislation, many more details are likely to surface. If you want to follow the coming series, "Like" our company page on Facebook.