MagnifyMoney 
When the Trump tax plan, formally known as The Tax Cuts and Jobs Act (TCJA), was enacted in 2017, taxes changed drastically for many Americans. Noted as the most sweeping rewrite of the tax code in more than three decades, the tax reform implemented new federal income tax brackets and doubled the standard deduction, among many other changes.
The majority of the Trump tax plan’s changes went into effect on Jan. 1, 2018, which means most Americans felt the impact of the TCJA for the first time when they filed their 2019 taxes.
Some of the changes made by the Trump tax plan may already be familiar to you, but here you can read about all of the changes it introduced or jump ahead to read about the rules you’re most interested in:
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
| Previously, 529 plan savings could only be used on qualified higher education expenses. |
In a major victory for wealthier families, you can now use 529 savings for private K-12 schooling. Tax benefits are now extended to eligible education expenses for an elementary or secondary public, private, or religious school. The new rules allow you to withdraw up to $10,000 a year per student (child) for education costs. |
| Old Rule | New Rule (Effective Jan. 1, 2019) |
|---|---|
| Consumers who did not qualify for an exemption and chose not to purchase insurance faced a range of tax penalties, depending on income. |
The individual mandate is out. Starting Jan. 1, 2019, consumers who do not purchase health insurance will no longer face penalties. GOP lawmakers argue that the measure will decrease spending on the tax subsidies it offers to balance out the cost of premiums for millions of Obamacare enrollees. However, without the mandate, experts caution that fewer healthy and young people will sign up for health coverage through the insurance marketplace, which will likely lead to increases in premium costs for those who remain the marketplace and could even induce some insurers to drop out of the market altogether. It’s a big blow to supporters of the long-embattled health care law. |
| Old Rule | New Rule (Effective Jan. 1, 2019) |
|---|---|
| The individual paying alimony or maintenance payments could deduct payments from their income. The person receiving the payments included them as income. | The person making alimony or maintenance payments does not get to deduct them, and the recipient does not claim the payments as income. This goes into effect for any divorce or separation agreement signed or modified on or after Jan. 1, 2019. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
|
The exemption amount was $84,500 for married joint-filing couples, $54,300 for single filers and $42,250 for married couples filing separately. The AMT exemption began to phase out at $120,700 for singles, $160,900 for married couples filing jointly and $80,450 for married couples filing separately. |
The AMT is here to stay but fewer households will have to face it. Under the new rules, which are in effect from Jan. 1, 2018 through Dec. 31, 2025, married couples filing jointly will be exempt from the alternative minimum tax starting at $109,400. Exemption starts at $70,300 for all other taxpayers (other than estates and trusts). The exemption phase-out thresholds will rise to $1,000,000 for married couples filing jointly, and $500,000 for all other taxpayers. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
| Taxpayers could exclude up to $20 a month of qualified bicycle commuting reimbursements from their gross income. That included payments from employers for things like a bicycle purchase, bike maintenance or storage. Workers could claim the exclusion in any month they regularly use a bicycle to commute to work and do not receive other transit benefits. | The exclusion is suspended through 2025. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
|
The child tax credit was $1,000 per child under the age of 17. The credit was reduced by $50 for each $1,000 a taxpayer earned over certain thresholds. The phase-out thresholds started at a modified adjusted gross income (AGI) over $75,000 for single individuals and heads of household, $110,000 for married couples filing jointly and $55,000 for married couples filing separately. |
The child tax credit doubles to $2,000 per qualifying child. Up to $1,400 of the child tax credit can be received as refundable credit (meaning it can go toward a tax refund). The new rule also includes a $500 nonrefundable credit per dependent other than a qualifying child. The credit begins to phase out at an AGI over $200,000 — for married couples, the phase-out starts at an AGI over $400,000. This rule is in effect through 2025. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
| Under a four-step graduated rate structure, the top corporate tax rate was 35 percent on taxable income greater than $10 million. | Permanently cuts the top corporate tax rate to 21 percent. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
|
Estates up to $5.49 million in value were exempt from the tax. The top tax rate was 40 percent. |
Doubles the exemption for the estate tax. Now, estates up to $11.2 million are exempt from the tax. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
| Homeowners could exclude up to $250,000 (or $500,000, if married filing jointly) of gains made when selling their primary residence, as long as they owned and primarily lived in the home for at least two of the five years before the sale. The exclusion could be claimed only once in a two-year period. |
Homeowners can still exclude gains up to $250,000 (or $500,000 if married filing jointly) when they sell their primary residence, but they have to have lived there longer. People who sell their homes after Dec. 31, 2017 now have to use the home as their primary residence for five of the eight years before the sale in order to claim the exclusion. It can only be claimed once in a five-year period. The new rule expires on Dec. 31, 2025. |
| Old Rule | New Rule |
|---|---|
| Taxpayers were previously allowed to deduct out-of-pocket medical expenses that exceed 10 percent of their adjusted gross income or 7.5 percent if they or their spouse were 65 or older. |
The threshold for all taxpayers to claim an itemized deduction for medical expenses is lowered to 7.5 percent of a filer’s adjusted gross income. The change applies to taxable years from Dec. 31, 2016 to Jan. 1, 2019. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
|
Tax preparation: Taxpayers could claim an itemized deduction of the amount of money they pay for tax-related expenses, like the person who prepares their taxes or any software purchased pr fees paid to fee to file forms electronically. Work-related expenses: Workers could deduct unreimbursed business expense as an itemized deduction, like the cost of a home office, job-search costs, professional license fees and more. Investment fees: Taxpayers could deduct fees paid to advisors and brokers to manage their money. |
Tax preparation: Taxpayers may not claim tax-preparation expenses as an itemized deduction through 2025. Work-related expenses: The bill suspends work-related expenses as an itemized deduction through 2025. Investment fees: Under the new rules, the investment fee deduction is suspended until 2025. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
|
Homeowners were allowed to deduct interest paid on mortgages valued up to $1 million on a taxpayer’s principal residence and one other qualified residence. They could also deduct interest paid on a home equity loan or home equity line of credit no greater than $100,000. These were itemized deductions. |
New homeowners can include mortgage interest paid on up to $750,000 of principal value on a new home in their itemized deductions. The old, $1 million caps continues to apply to current homeowners (those who took out their mortgages on or before Dec. 15, 2017), as well as refinancing on mortgages taken out on or before Dec. 15, 2017, as long as new mortgage amount does not exceed the amount of debt being refinanced. Homeowners CAN deduct interest paid on a home equity line of credit or home equity loan, so long as the loan was used to buy, build or substantially improve your home. These changes are set to expire after 2025. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
| Previous tax law allowed taxpayers to deduct moving expenses as long as the move was of a certain distance from the taxpayer’s previous home and the job in the new location is full-time. |
The new tax bill suspends the moving expense deduction through 2025. Until then, taxpayers are not permitted to deduct moving expenses. Moving-related deductions and exclusions remain in place for members of the military. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
| All pass-through business owners’ income was previously subject to regular personal income tax. |
Under the new laws, pass-through business owners can deduct up to 20 percent of their qualified business income from a partnership, S corporation or sole proprietorship. Individuals earning $157,500 and married couples earning $315,000 are eligible for the fullest deduction. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
| Individuals could deduct uninsured losses above $100 when property was lost to a fire, shipwreck, flood, storm, earthquake or other natural disaster. The deduction was allowed as long as the total loss amounted to greater than 10 percent of the taxpayer’s adjusted gross income. | The new tax bill only allows taxpayers to claim the deduction if the loss occurred during a federally declared disaster, through 2025. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
|
Taxpayers could reduce their adjusted gross income by claiming personal exemptions — generally for the taxpayer, their spouse and their dependents. Taxpayers could deduct $4,050 per exemption in 2017, though the deduction was phased out for taxpayers earning more than certain AGI thresholds. The phase out began at an AGI over $313,800 for married couples filing jointly, $287,650 for heads of household, $156,900 for married couples filing separately and $261,500 for all other taxpayers. |
Personal exemptions have been suspended through 2025. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
| Taxpayers who did not itemize could claim the current standard deduction of $6,350 for single individuals, $9,350 for heads of household or $12,700 for married couples filing jointly |
Standard deductions for all nearly double under the new rules. Individuals see standard deductions rise to $12,000; forlim heads of household, it rises to $18,000; and for married couples filing jointly the standard deduction increases to $24,000. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
| Taxpayers had the option of including state and local property, income and sales taxes as itemized deductions. |
Taxpayers are limited to claiming an itemized deduction of $10,000 in combined state and local income, sales and property taxes, starting in 2018 through 2025. Taxpayers cannot get around these limits by prepaying 2018 state and local income taxes while it is still 2017. The bill says nothing about prepaying 2018 property taxes. |
| Old Rule | New Rule (Effective Jan. 1, 2018) |
|---|---|
| Student loan debt discharged due to death or disability was taxed as income. | Under the new tax bill, student loan debt discharged due to death or disability after Dec. 31, 2017, will not be taxed as income. The rule lasts through 2025. |
| Tax Rules Pre-TCJA | Tax Rules Post-TCJA |
|---|---|
|
Before 2018, there were seven tax brackets. The rate on the highest earners was 39.6 percent for taxpayers earning above $418,400 for individuals and $470,700 for married couples filing taxes jointly. |
The new rules retain seven tax brackets, but the brackets have been modified to lower most individual income tax rates. The new brackets expire in 2027. Top income earners — above $500,000 for individuals and above $600,000 for married couples filing jointly — falls from 39.6 percent to 37 percent. The majority of individual income tax changes would be temporary, expiring after Dec. 31, 2025. |
| Pre-TCJA Tax Brackets | Post-TCJA Tax Brackets (Effective Jan. 1, 2018) | ||
|---|---|---|---|
| Single Individuals | |||
| Taxable Income | Tax Bracket | Taxable Income | Tax Bracket |
| $9,325 or less | 10% | $9,525 or less | 10% |
| $9,326 to $37,950 | 15% | $9,526 to $38,700 | 12% |
| $37,951 to $91,900 | 25% | $38,701 to $82,500 | 22% |
| $91,901 to $191,650 | 28% | $82,501 to $157,500 | 24% |
| $191,651 to $416,700 | 33% | $157,501 to $200,000 | 32% |
| $416,701 to $418,400 | 35% | $200,001 to $500,000 | 35% |
| Over $418,400 | 39.60% | Over $500,000 | 37% |
| Married Individuals Filing Joint Returns and Surviving Spouses | |||
|---|---|---|---|
| Taxable Income | Tax Bracket | Taxable Income | Tax Bracket |
| $18,650 or less | 10% | $19,050 or less | 10% |
| $18,651 to $75,900 | 15% | $19,051 to $77,400 | 12% |
| $75,901 to $153,100 | 25% | $77,401 to $165,000 | 22% |
| $153,101 to $233,350 | 28% | $165,001 to $315,000 | 24% |
| $233,351 to $416,700 | 33% | $315,001 to $400,000 | 32% |
| $416,701 to $470,700 | 35% | $400,001 to $600,000 | 35% |
| Over $470,700 | 39.60% | Over $600,000 | 37% |
| Heads of Households | |||
|---|---|---|---|
| Taxable Income | Tax Bracket | Taxable Income | Tax Bracket |
| $13,350 or less | 10% | $13,600 or less | 10% |
| $13,351 to $50,800 | 15% | $13,601 to $51,800 | 12% |
| $50,801 to $131,200 | 25% | $51,801 to $82,500 | 22% |
| $131,201 to $212,500 | 28% | $82,501 to $157,500 | 24% |
| $212,501 to $416,700 | 33% | $157,501 to $200,000 | 32% |
| $416,701 to $444,550 | 35% | $200,001 to $500,000 | 35% |
| Over $444,550 | 39.60% | Over $500,000 | 37% |
| Married Individuals Filing Separate Returns | |||
|---|---|---|---|
| Taxable Income | Tax Bracket | Taxable Income | Tax Bracket |
| $9,325 or less | 10% | Not over $9,525 | 10% |
| $9,326 to $37,950 | 15% | $9,525 to $38,700 | 12% |
| $37,951 to $76,550 | 25% | $38,701 to $82,500 | 22% |
| $76,551 to $116,675 | 28% | $82,501 to $157,500 | 24% |
| $116,676 to $208,350 | 33% | $157,501 to $200,000 | 32% |
| $208,351 to $235,350 | 35% | $200,001 to $300,000 | 35% |
| Over $235,350 | 39.60% | Over $300,000 | 37% |
Teacher deduction
Teachers can deduct up to $250 for unreimbursed expenses for classroom supplies or school materials from their taxable income.
Electric cars
Electric car owners who bought a vehicle after 2010 may be given tax credit of up to $7,500, depending on the battery capacity.
Adoption assistance
Adoptive parents are allowed a tax credit and employer-provided benefits up to $13,570 per eligible child in 2017.
Student loan interest deduction
Student loan borrowers may deduct up to $2,500 on the interest paid for student loans every year.
Low-income earners: Changes to the tax rates at lower-income levels were less pronounced or nonexistent compared to the changes in higher brackets, offering no tax break for lower-income households.
Middle-class earners: The decreased tax rates should have decreased the taxable income for middle-class earners, as long as they adjusted their W-4 withholding forms.
High-income earners: With their high levels of income falling into more brackets, high-income taxpayers had more to gain from the lowered tax rates. Those with large amounts of income from investments also benefited from the decreased tax brackets for capital gains, meaning their investment income was also reprieved, especially at high levels.
High-value estates: The Trump tax plan doubled the estate tax exemption amount from $5.49 million in 2017 to $11.2 million in 2018.
Areas with high state and local income tax: The Trump tax plan amended the state and local income tax (SALT) deduction so that taxpayers can only claim up to $10,000 in combined state and local income, sales and property taxes as an itemized deduction. Taxpayers living in places with high state and local taxes will get disproportionately hit by this change.
Taxpayers using personal exemptions: A personal exemption allowed you to deduct set amounts for each taxpayer and dependent on your tax return, which could have benefitted taxpayers with large families of dependents. This exemption and possible tax benefit for many has now been suspended.
Those without health insurance: The Trump tax plan eliminated the tax penalty you could face if you did not enroll for health insurance under the Affordable Care Act (ACA) and did not qualify for an exemption.
Taxes for tax year 2020 are due to the IRS by April 15, 2021. If you need more time to file, you can file Form 4868 by April 15 to receive an automatic six-month extension. However, this does not provide a payment deadline extension if you owe taxes; you will still have to make your tax payment by April 15.
Lauren PerezLauren Perez is a former writer at MagnifyMoney who covered deposit accounts and Federal Reserve meetings. Prior to joining LendingTree, she was a personal finance writer for SmartAsset. She has a B.A. in English from the University of Rochester.
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