Part 1: 2017 Tax Cuts & Jobs Act - What You Need to Know

We hope this finds you getting ready to spend some time with your family and friends this holiday season.  We know that taxes are probably the last thing on your mind during the holidays.  However, with the recent passage of the Tax Cuts and Jobs Act by both the House and Senate, and with expectations that President Trump will sign the bill into law, we wanted to break down the bill and highlight some key provisions that could affect you.  We will be sending out a series of emails which will highlight some of the provisions.  All provisions are effective 1/1/2018 unless otherwise stated.  As always, if you should have any questions, please feel free to reach out to our office.

Changes to Individual Deductions

Standard Deductions
Generally, taxpayers may take the standard deduction or itemize deductions and receive a personal exemption for each family member. The Act increases the standard deduction amount, reduces or eliminates numerous itemized deductions (as will be discussed in more detail below) and eliminates the personal exemption. The result of these changes is that millions more Americans are likely to take the standard deduction rather than itemize. Individuals should review the amount their employers are withholding in light of the lower tax rates, the higher child tax credit (discussed below), loss of the personal exemption and the higher standard deduction.

2018 Filing Status

Standard Deduction



Married Filing Jointly


Head of Household



Temporary Reduction in Medical Expense Deduction Floor
For tax years 2017 and 2018 medical expenses that exceed 7.5% of AGI will be deductible for all taxpayers. The percentage will go back to 10% in 2019.


Limitation on Deduction for State and Local Taxes
The aggregate amount of all state and local property, income and sales taxes that are deductible will be $10,000 ($5,000 if married filing separately) per year. EXCEPT, if any of those taxes are paid in carrying on a trade or business then the cap does not apply. Also, unless paid or accrued in carrying on a trade or business, a taxpayer can no longer deduct foreign real property taxes. If a state/local tax is paid before 1/1/2018 for a tax imposed for a taxable year beginning after 12/31/2017, the tax will be treated as paid on the last day of the taxable year for which such tax is imposed. The Joint Committee on Taxation analysis of the Act makes it clear that an individual may not claim an itemized deduction in 2017 on pre-payment of income tax for a future taxable year in order to avoid the $10,000 cap.


Limit on Deduction for Qualified Residence Interest
Interest paid on home equity indebtedness is not deductible. Interest on a qualified residence is limited to $750,000 ($375,000 married filing separately) of indebtedness. This is lowered from $1 million ($500,000 married filing separately). This provision applies only to indebtedness incurred after 12/15/2017.


Suspension of Personal Casualty Loss Deduction
Personal casualty loss deductions will only be allowed for a Federally-declared disaster.


Suspension of Miscellaneous Itemized Deductions
No miscellaneous itemized deductions are allowed. (Taxpayers have been able to deduct miscellaneous items that exceed 2% of AGI up to certain threshold amounts.)


The current IRS code (section 68) currently has an overall limit on all itemized deductions. The new Bill (section 11046) removes this limit for tax years 2018 through 2025.