2. The standard deduction nearly doubles.
While the personal exemption is gone (more about that later), the new law gives an enormous boost to the standard deduction in 2018 for all filers.2
*Single filer: $12,000 (instead of $6,500)
*Married couples filing separately: $12,000 (instead of $6,500)
*Head of household: $18,000 (instead of $9,350)
*Married couples filing jointly & surviving spouses: $24,000 (instead of $13,000)
Incidentally, the additional standard deduction remains in place. Single filers who are blind, disabled, or aged 65 or older can claim an additional $1,600 deduction for 2018. Married joint filers can claim additional standard deductions of $1,300 each for a total additional standard deduction of $2,600 in 2018.3
3 AMT exemption amounts are much larger.
The Alternative Minimum Tax was never intended to apply to the middle class – but because it went decades without inflation adjustments, it sometimes did. Thanks to the tax reforms, the AMT exemption amounts are now permanently subject to inflation indexing.
Look at the change in AMT exemption amounts for 2018:
*Single filer or head of household: $70,300 (was $54,300 in 2017)
*Married couples filing separately: $54,700 (was $42,250 in 2017)
*Married couples filing jointly & surviving spouses: $109,400 (was $84,500 in 2017)
These increases are certainly sizable, yet they pale in proportion to the increase in the phase-out thresholds. They are now at $500,000 for individuals and $1 million for joint filers, as opposed to respective, prior thresholds of $120,700 and $160,900.2
4 The Child Tax Credit doubles to $2,000.
In compensation for the loss of the personal exemption, the Tax Cuts & Jobs Act boosted this credit, which is especially significant for large families. Up to $1,400 of the CTC is now refundable. Phase-out thresholds for the credit have moved north dramatically. They are now set at the following modified adjusted gross income (MAGI) levels:
*Single filer or head of household: $200,000 (was $75,000 in 2017)
*Married couples filing separately: $400,000 (was $110,000 in 2017)
Also, the Child & Dependent Care Tax Credit remains – parents still have a chance to deduct qualified child care expenses of up to $1,050 for one child under age 13 or $2,100 for two children under age 13. Dependent care Flexible Spending Accounts (FSAs) are still allowed as well: employees may save up to $5,000 of pre-tax dollars per year to help pay for qualified child care expenses.
Lastly, see the “Other Interesting Developments” section of this guide to learn about a significant non-financial change involving the Child Tax Credit.2,4
5 You may be eligible to claim a new $500 non-refundable credit for non-child dependents.
This represents an effort to compensate for the loss of the personal exemption taxpayers could previously claim for non-child dependents. The MAGI phase-out thresholds applicable to the Child Tax Credit also apply to this “family credit.” You are eligible to claim it if you have qualifying dependents in your household who do not meet the federal tax definition of a qualifying child: parents, relatives, children age 17 or older.2,5