To say that the new tax code is complicated would be an understatement. The final bill, which was signed by President Trump on December 22, 2017, is more than 500 pages long. Not to mention, the changes are substantial and currently in effect for the 2019 tax season. We have simplified and highlighted five notable changes for personal taxes:
- For single tax filers, the standard deduction has increased from $6,500 to $12,000. For joint filers, the standard deduction has increased from $12,7000 to $24,000. This near doubling of the standard deduction serves as an incentive for people to claim a standard deduction in 2019 instead of an itemized one.
Child Tax Credit:
- Under the new tax code, parents with children under 17 can receive a tax credit of $2,000 per child. Formerly, the tax credit was only $1,000 per child.
Mortgage Interest Deduction:
- Anyone who takes out a mortgage on a house between December 15, 2017 and December 31, 2025 can only deduct interest up to $750,000, or $375,000 for married taxpayers filing separately. Mortgages taken out prior to December 15, 2017 can be deducted up to $1,000,000, or $500,000 for married taxpayers filing separately.
- Previously, tax filers who have gone three consecutive months or more without health insurance had to pay a 2.5% gross income penalty up to a maximum of $2,085. The new tax code has repealed this penalty.
- 529 plans have been expanded to include K-12 students. Parents can now use up to $10,000 per year from 529 accounts tax free to pay for private school tuition.