In the last few weeks, we have spent many hours spent reading parts of the the new bill, examining articles, posts and summaries, attending several tax webinars,  and discussing these changes internally and with different colleagues. From our initial analysis, these are the main items that impact individuals:

  1. Tax rates from TCJA (Tax Cuts and Jobs Act) are being made permanent, adding the COLA (Cost Of Living Adjustments, which means indexed for inflation)
  2. Standard deduction extended the doubled standard TCJA (Tax Cuts and Jobs Act)  plus indexed for inflation
  3. The personal exemption is eliminated but a senior bonus is added on top of standard deduction – $6,000 that phases out at $175,000 for the period from 2025 to 2028
  4. SALT (State and Local Tax) limit increased to $40,000 (before it was $10,000) with phase out that starts at $500,000 for the period from 2025 to 2029
  5. PTET (Pass-Through Entity Tax) -> Status quo (made permanent)
  6. QBID (Qualified business income deduction) -> Status quo (made permanent)
  7. Tip Income – Up to $25,000 with phase out of $150,000 for the period from 2025 to 2028
    1. List of eligible industries will be released by Treasury
    2. Keep in mind different tax implications for tips (voluntary and eligible) versus gratuity (set up automatically – i.e. parties of 5 or more and not eligible)
  8. Overtime Pay – Up to $12,500 with phase out of $150,000 for the period from 2025 to 2028
    1. Regulations follow the Fair Labor Standard Act
  9. Charitable contributions
    1. Non itemized taxpayers can deduct $1,000
    2. 0.5% Floor not deductible – High earners might not be able to deduct these contributions
  10. Child tax credit from $2,000 to $2,200 with phase out over $200,000
    1. Social security required for parents and kids
  11. Estate tax – Increased to $15m indexed for inflation
  12. Many other changes, like the following:
    1. Mortgage interest on the first $750,000 (stays the same)
    2. Personal casualty losses in Federal disaster area
    3. Gambling 90% deduction of losses in excess gains
    4. Interest on car loan domestic auto purchases for up to $10,000 and phase out of $100,000 for the period from 2025 to 2028
    5. New tax deferred (Trump account) for children born 2025 to 2028 until 18 years old and $5,000 annual investment diversified fund

If you have any questions about how these new tax law changes may affect you, feel free to reach out to our team of tax professionals — we’re here to help.