When this book was finalized, Congress had just approved and sent to the President for his signature the Tax Cuts and Jobs Act. Listed below are key proposals for individuals that take effect for 2018 (except where noted) and expire at the end of 2025. See the e-Supplement at jklasser.com for further details on these and other new law provisions for individual taxpayers and business owners.
The top individual income tax rate drops to 37%, with lower rates of 35%, 32%, 24%, 22%, 12% and 10%. Owners of pass-through entities will pay the individual income tax rates on their profits, but subject to several restrictions and limits, a 20% deduction for this income may be available (i.e., qualifying taxpayers pay tax on only 80% of the pass-through income).
The prior-law zero, 15% and 20% maximum rates for net capital gain and qualified dividends are retained, with an inflation adjustment to the 2017 income cutoffs between the zero and 15% rates, and between the 15% and 20% rates.
Standard deduction increased but personal exemptions repealed
The deduction for personal and dependency exemptions is eliminated, but the standard deduction is increased to $24,000 for joint filers, $18,000 for heads of households, and $12,000 for other filers. These amounts will be indexed for inflation for years after 2018. Taxpayers who are age 65 or older or blind may ...