U.S. TRUST 4B
Bank of America Private Wealth Management
TAX BULLETIN 2018-1
JANUARY 2, 2018
TAX REFORM SIGNED INTO LAW
OVERVIEW Without much fanfare but with typical political controversy, the House and Senate successfully reconciled their
respective tax bills and the new tax legislation (the “Act”), was signed into law by President Trump on December 22"¢, 2017. House and Senate conference committee members leaned in favor of many provisions contained in the Senate proposal. A significant move in that direction was retaining the elimination of the Affordable Care Act’s individual mandate (the penalty for failing to maintain minimum essential health care coverage) and using the Senate’s methodologies for taxing income from pass-through businesses (though some elements of the House bill entered into the computation). In other circumstances, a true compromise was reached, such as meeting in
the middle on modifications to mortgage interest deductibility.
In order to abide by Senate budget reconciliation rules and ensure the Act does not result in budget deficits outside the 10-year budget window, the Act makes almost all changes to individual income tax provisions temporary — nearly all expire at the end of 2025. No doubt, this will create tax complexity and political difficulties. On the other hand, most corporate provisions are permanent. This Tax Bulletin 2018-1 summarizes certain provisions of the Act and adds observations on income, estate and pass-through taxation..4
INDIVIDUAL TAXES
2017 Law? 2018 Law?
10, 15, 25, 28, 33, 35, 39.6% 10, 12, 22, 24, 32, 35, 37% Top rate would apply to income over $600,000
for married filing jointly; $500,000 for single.*
Individual Tax Rates
$12,700 ($6,350 if single) $24,000 ($12,000 if single), enhanced for
Standard Deducti andard Deduction elderly and blind?
Kiddie Tax
Unearned income of a child taxed at parents’ tax rate if higher than child’s rate
Simplifies kiddie tax by applying trust rates to unearned income of a child?
Personal Exemption
$4,050, subject to phase-out
Eliminates; merged with higher standard deduction*
Child / Dependent Tax Credits
Top Capital Gains/Dividend Tax Rate
$1,000, per qualifying child subject to phase-out beginning at $110,000 (married) and $75,000 (single taxpayers)
20% (plus 3.8% surtax)
$2,000 per qualifying child, $500 per non-child dependent; subject to phase-out beginning at $400,000 (married) and $200,000 others*
Maximum rate of 20% is retained; same breakpoints as current law
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